How do banks generate income?

[Hyphen(-)]

There is more to a bank's income; we only see the physical charges they are charging without knowing the other charges they make offline without the account owner's permission.

They respond promptly according to your demands on your accounts, they also have zero tolerance for fraud and are very security conscious, security intelligence and anti financial crime expertise but they've policies of not collecting dime from customers accounts yet banks are most wealthiest institutions on earth.

They have zero tolerance for fraud, while some of them go bankrupt due to poor policy because of its centralization.

How do they make money?
* mortgage - using some billionaires account to buy housing properties and leasing them
* estate and lands with same patterns
* SMS alert charges
* Transfer charges
* Syphons dormant accounts or dead people accounts that are inactive with enough money in it.
* ATM and investment cards
* sales of currencies like dollar to naira
* preparation of international documents
* savings people's valuables like gold, certificate, court documents, WILLS, and so on.

More to this!
Banks do utilize customer money to make loans to customers and profit; they also use customer money to make personal investments for personal gain, which contradicts their policy because they only stated that they would protect customers' wealth and not use it for personal gain.

[1714813641]

1714813641

[Kelward]

Bank is an establishment known for financial services but what they do these days is way more than that. And the things they do are both legal and illegal, still, they cover up under the guise of the legality that covers the sector.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

There is a lot that will always make me sceptical of banks.

Traditionally, banks make money from interest in money that they lend to people and organisations, and charges on services rendered. But the way that banks are building modern structures as  branches everywhere, buying brand new cars for their marketers, paying attractive salaries to their staff and declaring large profits every year, makes you to wonder whether it is mainly from interests on money borrowed and the small charges on transactions that they make all this money from. Although I hear often about unconfirmed reports that they help corrupt politicians to keep and launder I'll gotten wealths. 

Having said all this, I still think that banks remain the safest place where you can keep your money. Because they never tell you that there is no money whenever you come to collect.

[stompix]

When a  bank gives you  a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...

Sorry, but this is completely inaccurate! Simple real-world personal example from 2017:

I've sold my house to a guy who took a mortgage to buy the old apartment, the price was 140 000E, he took that loan, the bank wired me the money, the full 140 000E, and I spend it like the next day buying my new apartment in which I live now.
So, where are the virtual money and how did the bank manage to pay me the entire amount when they deal only with 10%?  

You forget that it's not the bank that's selling you this, the bank needs to pay the actual owner of the house that can go the next day out to Las Vegas and gamble and whore all the sum in a day, and the last time I checked neither casino nor brothels take virtual money!

[CryptSafe]

As  a financial institution, they are the richest and wealthiest just as a poster has said but they are the worst of them all to loot you plane blank without any sniff from you and if you think of raising dust, they blackmail you and beat you to your own game if they look your source is not  a genuine one to go by.

OP i see you made mention of some ways these broad day light  crooks that calls themselves financial institutions loot and i think some points are missing to add up;

They roam about politicians  seeking for who would approve of them to be the current state government financial institution so that anything in the state coffers would be monitored by them and they end up playing smart with the politicians to loot from the state treasury.

I wonder what they do stamp on fiat transactions that they demand for duty stamp charges. This is very crazy as it is done in excess in my country.


Banks aid and cover up fraudulent transactions so as to get big rewards from the fraudsters and when the senior fraudsters(government and government agencies) comes after them they play two to tango, take their own share and walk away.


They really get illegal fees from all these transaction and cover up lots of untold and seen deals. They are just too criminal minded.

[Desmong]

There are so many ways many of these banks generate income to themselves but we might not know because we don't carry out research or ask questions about how they are able to finance there business without quickly going bankruptcy. It is clear that many banks now are going bankruptcy but there major problem that led to that may be out of mismanagement.

[Wend]

Bank is an establishment known for financial services but what they do these days is way more than that. And the things they do are both legal and illegal, still, they cover up under the guise of the legality that covers the sector.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

There is a lot that will always make me sceptical of banks.

Banking is also a business model and to be profitable in business they need tricks. You can't say they blackmail or steal customers' money. Just like when you sell to someone else, you buy $1 and sell $10, no one is saying you stole the customer's money. Because customers come to you by themselves, and so do all those, who need to use the bank. You voluntarily come and ask to use their services, they do not put a knife to your neck and force you to deposit money in the bank.

Bitcoin investors don't like banks, but there's no need to badmouth them too much as we are still using their services daily. How will you enter the market, and invest in bitcoin

[STT]

Fractional reserve and central banking would be the most succinct answer, neither of which a person or normal business has access to.  They get the cheap money at many multiples of availability vs their actual real capital.   All they have to do is loan out that money to people who will likely return it with interest, if they are involved with houses they either get the house or the regular payment of interest in excess of the rate the bank itself pays.
    Its been a good business for years with 'cheap money' made available primarily and first and foremost to banks or other similar large finance institutions.   Somehow they still manage to over lend or borrow in markets which upset them but most of the time its a strong bias to them for profits with a gift of being related to the issuer of national currency its good game when you are friends with the dealer.

[arallmuus]

When a  bank gives you  a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...

It's downright criminal, but it's legal... This is why we need to be our own bank... If you don't own 300.000, you shouldn't be allowed to loan out 300.000.

They actually need to have 300k in cash to you if someone needs to have their transaction in cash but if it is a transaction from an account to another account then all they need to do is just to type in that amount of money virtually. Yeah its borderline legal but thats how banks operate and they made money through that

This is a system that everyone have to live in and no one really question this system at all not until bitcoin was created to actually counter this all fiasco

[dunfida]

snip

How do they make money?
* mortgage - using some billionaires account to buy housing properties and leasing them
* estate and lands with same patterns
* SMS alert charges
* Transfer charges
* Syphons dormant accounts or dead people accounts that are inactive with enough money in it.
* ATM and investment cards
* sales of currencies like dollar to naira
* preparation of international documents
* savings people's valuables like gold, certificate, court documents, WILLS, and so on.

This is what makes financial institutions very wealthy.

You forgot the most important way in which they earn money, which is to use the money you have deposited on your bank account as their own and make some risky bets on the markets, after all they cannot lose, if they win then they can reap the profits, but if they lose then they can cry to the government in turn so they are rescued, this is what happened with the subprime mortgage crisis, however the difference now is I am not so sure the governments have the capabilities to save them even if they want to.

Wasnt aware for banks to be that having that consideration on rescuings banks if ever they would go bankrupt? Im not really sure about that because Gov't wont really be that dumb on saving up an institution but

it wont be shocking if they would really be doing something on not to make it happen but its really hard to believe on that banks would really be lying into the floor and failed out. Its true that they do give that
peanut interest out of your deposits on yearly basis and lend them into others and putting and giving them huge interest which its an easy money for them.

If ever the said person who doesnt able to pay up his obligations then we do know that collateral would really be get and would be sold out later on which means its even more money.
Is there anything that we can do? There's none and this is why crypto space is really getting that attention because there are people who do really
hate banks basing up on the services and rip off that they do make.

[bettercrypto]

One of the reasons why banks make money is that their clients' money, which is not their money or property, they lend to their other clients who also want to borrow, and they charge a lot of interest. Then the money entrusted to them, they will only grow very low and then there will be a lot of requirements before you can be approved for the loan you are applying for.

     The second thing I know is that they also put money in stocks, so that they have an interest profit here monthly that their clients don't know that they also grow a lot. So with this style of banking, I would rather spend my money in the business than put it and entrust it to all of them.

[kro55]

When a  bank gives you  a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...

It's downright criminal, but it's legal... This is why we need to be our own bank... If you don't own 300.000, you shouldn't be allowed to loan out 300.000.

They actually need to have 300k in cash to you if someone needs to have their transaction in cash but if it is a transaction from an account to another account then all they need to do is just to type in that amount of money virtually. Yeah its borderline legal but thats how banks operate and they made money through that

This is a system that everyone have to live in and no one really question this system at all not until bitcoin was created to actually counter this all fiasco

I've never heard of this, it's so absurd. I used to take out a bank loan to build my business, and I have never missed a dime on my loan.
People are comparing banking to bitcoin, and I want to know if anyone here needs money, needs capital to start a business, and does anyone get any help from bitcoin? I mean, are we going to get a loan from bitcoin?

Honestly, there's no need to compare banking and bitcoin anytime, anywhere, as both have different use cases. We are going to use banking for some purposes, bitcoins for some, they are completely different, so let's stop comparing them in this case.

[Kadal Ijo]

Banks have large capital so they can easily turn money around for profitable things, almost all business units have relationships or credit with banks so that banks get income from the interest provided, for example banks get money from customers and banks give interest of around 8% per year, then the bank distributes credit and earns about 25% interest a year so that it gets a profit from the difference in interest.

[Cuenta Alternativa]

When a  bank gives you  a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...

Sorry, but this is completely inaccurate! Simple real-world personal example from 2017:

I've sold my house to a guy who took a mortgage to buy the old apartment, the price was 140 000E, he took that loan, the bank wired me the money, the full 140 000E, and I spend it like the next day buying my new apartment in which I live now.
So, where are the virtual money and how did the bank manage to pay me the entire amount when they deal only with 10%?  

You forget that it's not the bank that's selling you this, the bank needs to pay the actual owner of the house that can go the next day out to Las Vegas and gamble and whore all the sum in a day, and the last time I checked neither casino nor brothels take virtual money!

It is accurate, you have misunderstood. mocacinno is saying that banks create that money out of thin air, not that the money created does not exist.

There are two forms of fiat money creation, the first is done by central banks and the second by commercial banks. When commercial banks lend money by creating it out of thin air with a lower reserve ratio, in some cases 2.5% or even 0%, they are creating money out of thin air even though the money they send you is real. You can spend it on buying a house or take it out in notes and count them one by one.

The point is that it is created because it is not based on a previously existing deposit (or a deposit of at most 10% of what you borrowed).

The system is sustained because people don't run to take money out of the banks - if only 10% did, there would be bankruptcies.

[gunhell16]

Of course, the more money they bring in, the more chances they will use their clients' money in their optional ways to make a profit.

The amount of interest they charge here is actually only for lending. Then the loans they make have collateral that if you don't pay, many collaterals end up being foreclosed and become the property of the bank, they don't have that many other sources.

[mocacinno]

When a  bank gives you  a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...

Sorry, but this is completely inaccurate! Simple real-world personal example from 2017:

I've sold my house to a guy who took a mortgage to buy the old apartment, the price was 140 000E, he took that loan, the bank wired me the money, the full 140 000E, and I spend it like the next day buying my new apartment in which I live now.
So, where are the virtual money and how did the bank manage to pay me the entire amount when they deal only with 10%?  

You forget that it's not the bank that's selling you this, the bank needs to pay the actual owner of the house that can go the next day out to Las Vegas and gamble and whore all the sum in a day, and the last time I checked neither casino nor brothels take virtual money!

It is accurate, you have misunderstood. mocacinno is saying that banks create that money out of thin air, not that the money created does not exist.

There are two forms of fiat money creation, the first is done by central banks and the second by commercial banks. When commercial banks lend money by creating it out of thin air with a lower reserve ratio, in some cases 2.5% or even 0%, they are creating money out of thin air even though the money they send you is real. You can spend it on buying a house or take it out in notes and count them one by one.

The point is that it is created because it is not based on a previously existing deposit (or a deposit of at most 10% of what you borrowed).

The system is sustained because people don't run to take money out of the banks - if only 10% did, there would be bankruptcies.

^^ this ^^ explains it better

If my understanding of fractional reserve is correct, i might have explained it better....

I asked chatGPT for an ELI5 about fractional reserve banking in regards to the housing market, and this is what it came up with... To the best of my understanding, this is correct.
The bottom line is that, in this example, there was an initial deposit of $20.000 (for example, on somebody's saving account), and in the end the banks manage to lend out (and collect intrest on) $200.000 with only the $20.000 in the bank account to back up all those loans. The person with the saving account gets intrest on the $20.000 whilst all the borrowers have to pay the bank intrest on $200.000.

The financial system plays this off as a good thing: they create more money in circulation and the economy wins... What they forget to add is that they multiply their income by creating "virtual" money and if everybody would withdraw their money ($200.000 in total), in the end the bank would only have $20.000 "for real" whilst everybody in the system does have a grand total of $200.000 on their accounts.

Certainly! Let's reframe the example using bank accounts and electronic payments in the housing market:

Imagine you're buying a house and need a loan from the bank. You go to the bank and apply for a mortgage. The bank reviews your application and approves you for a $200,000 loan.

Now, let's consider the fractional reserve banking system at play. The bank is required to keep only a fraction of the deposited money as reserves, let's say 10%. So, when you make a down payment of $20,000, the bank keeps $2,000 (10% of $20,000) as reserves and loans you the remaining $18,000.

With the $18,000 loaned to you, you can pay the seller of the house. The seller receives the payment and deposits it into their bank account. Now, the seller's bank needs to maintain its reserve requirement, which is 10% of the deposit. So, the bank keeps $1,800 (10% of $18,000) as reserves and can lend out the remaining $16,200 to someone else who needs a loan.

The cycle continues as the money flows through the banking system. Each time money is deposited and loaned out, a fraction is held as reserves, and the rest is available for lending again.

This process of fractional reserve banking allows the bank to create more money than it actually has on hand. In our example, even though the initial deposit was only $20,000, a total of $200,000 ($20,000 + $18,000 + $16,200 + ...) can be created through loans in the housing market.

This system helps facilitate the housing market by increasing the availability of funds for borrowers. It allows individuals like you to purchase homes and stimulates economic activity. However, it's important for banks to manage their reserves carefully to ensure stability and meet customer demands for withdrawals.

Keep in mind that this is a simplified explanation, and the actual banking system is more complex. Nevertheless, I hope this example helps you understand how fractional reserve banking and electronic payments work in the housing market.

source: https://chat.openai.com/

[EarnOnVictor]

Bank is an establishment known for financial services but what they do these days is way more than that. And the things they do are both legal and illegal, still, they cover up under the guise of the legality that covers the sector.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

There is a lot that will always make me sceptical of banks.

Banking is also a business model and to be profitable in business they need tricks. You can't say they blackmail or steal customers' money. Just like when you sell to someone else, you buy $1 and sell $10, no one is saying you stole the customer's money. Because customers come to you by themselves, and so do all those, who need to use the bank. You voluntarily come and ask to use their services, they do not put a knife to your neck and force you to deposit money in the bank.

Bitcoin investors don't like banks, but there's no need to badmouth them too much as we are still using their services daily. How will you enter the market, and invest in bitcoin

You are getting this all wrong buddy, perhaps I should break them down for you. Mind you, these are not the main benefits but the ill-additional points I want people to know about banks. And since the 1&2 are simple enough to understand, let me bother myself only with 3&4.

3. They steal money from customers' accounts through double and unexplainable charges: It's not new that money disappears from people's bank accounts. It has happened to me and many people around me. At times, they have an explanation for it as like double charges or mistakes, and at times they do not have any excuse for it and refund the money back. What if I didn't take it up, and what about those that will just overlook it? There is more to that, I just gave those little examples.

Another example was my bank account which has been dormant for over 10 years. I just received an SMS from them that an ATM has been issued for me thereby charging me. On this same dormant account, I received regular deductions of money (little though) until they removed all the balance to almost zero. Banks are guilty of improper accountability to enrich themselves.

4. They blackmail their customers and steal the money of the faint in heart: This might be applicable to illegal inflow but banks do it. When they sense such inflow, some banks contact the custom for an explanation or take necessary action. Some customers will have to go by their terms maybe for the bank to take all and abandon the account or cut their share before withdrawals could be allowed to take place.

Banks are crooks...

[robattfield]

Most banks still rely heavily on deposits and loans as it is the most stable source of income and has been controlled by superior regulations. However, banks also find that developing new revenue streams enhances profitability and reduces risk. Therefore, banks will continue to develop new revenue streams to ensure stability and sustainable growth. In fact, the central bank of each country plays an important role in managing the currency and controlling inflation.
Controlling the world economy from banks is a complex issue and requires cooperation between countries. The central banks of countries need to have a suitable and coordinated plan to strengthen monetary and economic management, reduce disparities in investment speed, and strengthen public debt management. In addition, the control of the world economy from the bank also needs to ensure risk reduction and increase transparency in financial activities. This requires central banks to continue to strengthen cooperation and implement policies related to controlling the world economy in an effective and sustainable way.

[irhact]

This is what makes financial institutions very wealthy.

You forgot to mention using of customers money to give out loan to buy loan to well know companies that'll pay them back with interest. Banks don't keep all the money deposited with them in their vault. They lend it out for people to use in doing business. They also borrow the money and invest in forex, real estate and other businesses that'll bring profits to them.

Banks are the wealthiest organization because they control money and money is the most important thing on earth as everyone that has it is in power. Banks have other means which to get money illegally. When their customers dies and no next of kin, they take the money.

[Helena Yu]

Banks generate a lot money from interest, charge and fee, it's already cover all of banks activities which impossible to mention each of them due to each banks has their own features, offers, rules etc.

Keep in mind, even you've calculate the inflation rate in your country and you've pick a bank deposit which give you return higher than your country inflation rate, also you're make sure you're nor get charge due to penalty. You still not beat the banks because banks will always making money even you've think you're the one who make money.

[DrBeer]

There is a huge field for "activity".
The money of physical and legal investors - do you think they are on the accounts there? On the accounts you see only numbers. And the money itself works all the time as loans / mortgages / installments and other financial transactions that bring profits. Why, if significant masses of deposits are taken from the bank, does the bank suddenly turn out to be bankrupt? Yes, because they live on your money and only at the expense of them.
There are still a huge number of schemes, from completely legal to those that are already outside the law. In our country, in times of rampant corruption and lawlessness, banks issued "their people" deliberately bad loans for hundreds of thousands of dollars, which were then covered by the financial support of the state bank. Yes, this is exactly the scheme that the bank owners built... Thank you that in 2015-2017 the banking sector of Ukraine was cleared of such financial black holes!