The Ultimate Guide Banking
The term “bank” conjures up images of stone buildings, medieval vaults, and Mission-style gardens. However, the history of bank branching in the United States is much different than you might think. While many American banks have historically been shy about extending their services abroad for banking, over the past few decades. Today, there are more than 5,000 independent financial institutions chartered by the Federal Reserve to help its members grow their businesses and expand into new markets. They do this by providing local access to services such as cash handling, loan processing, and even software development. For those who want to get their foot in the door with a smaller local branch bank but aren’t quite ready to take on an existing institution or build their brand from scratch— or for those who just want to know where their local bank branches are — this article is for you!
What is a bank?
A bank is a voluntary association of businesses and/or banks that loan money to members for personal or business use. It can also be a government entity that prints its own money. While a bank may have certain similarities with a business, it is not the same thing. While a business may borrow money and then repay it, a bank is a store of financial assets that are legally allowed to loan its customers money. The main difference between a business and a bank is that a business has to be able to pay back the money it borrows while a bank doesn’t.
What does a “bank” mean in the U.S.?
A bank in the United States is a private corporation that is chartered by the U.S. government and is allowed to operate under the supervision of the FDIC. In other words, banks in the U.S. are not public utilities as in many other countries. As a private institution, the FDIC oversees the operations of most U.S. banks and Credit Unions, as well as certain other private banks and credit unions, but not all. There are currently 5,251 commercial banks and 1,209 special-purpose banks that are FDIC-insured, meaning that if your checking or savings account is lost or stolen, you can call the FDIC and have it investigate and take action against the account holder. Many other banks and credit unions are now insured as well, and the number of banks and credit unions that are insured is constantly rising.
The Right Way Bank
The first thing you have to do when you decide to branch out into a new market is to set up a detailed plan to assess your potential market size and potential competitors. Then, you need to acquire as much information as possible about your potential customers and their habits. Your plan should cover everything from the demographics of your potential customers to the types of products and services they purchase. For example, if you plan on opening a branch in Sacramento, California, you need to know the makeup of that city, as well as what bank customers are like.
What do they do? How much do they make? Where do they live? How many employees does the bank have? What are their spending habits?
Why You Should Banking
As you can see from the list above, there are many benefits to banks branching out into new markets. If you are a small independent bank that wants to expand its services to meet the growing demands of its community, or if you’re a larger regional bank looking to expand your footprint in a new area, bank branching can be a very effective way to meet these demands. To name a few benefits, your customers will be able to get services they may not otherwise be able to access (cashier’s check cashing, loan processing, online bill payment, etc.), you will be able to choose the right customers (i.e., those who need your services the most), and your costs will be lower overall because you won’t need to build a new branch facility and you won’t have to find as much room in your budget for equipment.
The Big 3 Banks vs. Other Banks in the U.S.
There are many banks and credit unions that have more features and services than the Big 3 banks, so it can be hard to know which one to choose. However, in order to help you make the right decision, we have ranked the Big 3 banks from most to least features and costs.
With that in mind, here are the Big 3 banks compared side-by-side:
Citibank: Federal Deposit Insurance Corporation (FDIC) insurance is the main reason to choose Citibank over the Big 3 banks. On the other hand, the Big 3 banks have much less competition and are therefore more likely to cost you more than Citibank.
JPMorgan Chase: Like Citibank, JPMorgan Chase is another big bank with a big footprint in many parts of the country. While many people may not mind having a local bank, there are many who find the commute to work or the line at the bank too long.
Wells Fargo: Wells Fargo is like the middle child of the Big 3 banks. While each of the other Big 3 banks has some regional presence, Wells Fargo is almost entirely concentrated in the West.
What to Know Before you Bank Here
Before you decide where to open a branch, you’ll have to know a few things about your potential customers. For example, what Are They? What Do They Do? and Where Do They Live? will help you better understand your potential customers and how you can help them. Once you have that information, you can choose your location wisely.
Mergers and Acquisitions
The biggest bank mergers and acquisitions in the history of the banking industry were the acquisitions of Bank of America and Countrywide Financial in 2008 and the formation of Wells Fargo Bank and Washington Mutual in 2012. While those were big news items, they were relatively small potatoes compared to the $17 billion acquisition of Bank of America by Wells Fargo in 2016.
Springing Into Action:
Getting Your Business Set Up and Running After a Bank Acquired It
Once you’ve chosen your bank and gotten your plan together, it’s time to spring into action. The first thing you’ll have to do is sign a contract with your potential customers that spells out your services and terms and conditions. Next, you’ll want to start making calls to find out what services your customers want and need. Be sure to get your products and services information ready, as well as any special pricing or deals you may have. After that, you’ll need to set up your business. The best way to do this is to find a location that is both convenient to your customers and has enough room for your growing in banking. A good location will allow you to continue to provide the services your customers expect while staying efficient and on budget.
Branching out into new markets can be a great idea for a small business that wants to expand its services or just doesn’t have time to build a new branch in its current location. It’s important to consider the pros and cons of each location carefully and make an informed decision based on what you think is best for your business.