Banking Archives - Page 2 of 11

Congratulations, you’re a grown-up!

That means that your money is doing more than just sitting in a savings account. You’ve got an IRA and you’re investing in real estate. Heck, you might even have some stocks or bonds.

As a savvy and forward-thinking person, you are already aware that interest rates are the price of borrowing money. These rates affect everything from auto loans to mortgages. When there are increased interest rates, lenders make more money on each loan.

But what does all this mean for your wealth?

We’re going to dig into this question to see how recent increases in interest rates might affect your current and future expenses. Keep reading to get the scoop.

The Federal Reserve Bank and the Overall Economy

The Federal Reserve Bank is a private bank that works independently of the federal government. It’s responsible for setting interest rates and regulating the banking system. When there are economic problems, they can lower or raise interest rates to help stimulate growth in the economy.

In May 2022, federal interest rates rose by half a percentage to 0.75% – 1%. This may increase to around 3% by the end of this year if we stay on track with our current economic situation and the inflation rate continues to rise as predicted. So you should continue to keep up to date on how this latest federal reserve hike are impacting business loans and mortgages.

Your Existing Loans

It is important to know how the new interest rates will affect your monthly payments if you already have a loan. If you have a fixed-rate mortgage, for example, there won’t be much of an impact on your debt since it does not change based on market conditions. However, if you have a variable-rate mortgage or student loans, higher interest rates could mean that your payment amount will increase and become more difficult to handle.

To avoid any surprises in the future, consider refinancing at a lower rate now while they’re still available. This can help reduce the cost of borrowing and improve overall savings. Plus, if there are other options available, like shorter terms or even no prepayment penalties, refinancing may be well worth it!

Credit Card Debt

If you have credit card debt, your interest rate is likely to increase because of the Federal Reserve’s rate hike. This is because credit cards are based on the prime rate, which moves in tandem with the federal funds rate.

If you have outstanding balances on multiple credit cards with different rates, consider merging them into one debt with a fixed interest rate that better matches what you pay now. That way, your payments will remain stable whenever your current card adjusts its rates.

The Housing Market

The housing market is one of the biggest economic drivers, so it’s no surprise that any changes to this sector would impact your wealth.

When interest rates increase, it becomes more affordable for you to buy a new home. On the flip side, renting may become more expensive as landlords pass along their rising expenses by raising rents (or evicting tenants).

Increased Interest Rates and the Stock Market

When the Federal Reserve Bank raises interest rates, it can have a positive impact on bank stocks. In fact, when the Fed raised interest rates in December 2018, bank stocks performed very well. Reason: When the Fed raises interest rates, savings accounts can earn more money and people are likely to use banks more often.

The stock market as a whole does not react favourably to rising hikes from the Federal Reserve Bank though. Instead, it goes down because of inflation eroding away at investors’ returns.

There’s no guarantee how your investment portfolio will move if interest rates go up. However, it is good practice that you regularly rebalance your portfolio so that any potential losses remain minimal.

Bonds and Other Fixed Investments

When you invest in bonds, you are lending money to the issuer of the bond. The issuer pays a fixed rate of interest on this loan (known as “coupon payments”), which is paid at regular intervals (usually monthly). Most bond issuers are corporations and governments, although they can also be other entities, such as mutual funds.

When interest rates rise, the price of bonds decreases to attract investors. Issuers might even be forced to reduce the interest rate they pay out in order to attract investors.

Personal Spending

It’s not uncommon for people to panic when they hear the word “interest rate hike.” But it’s important to remember that interest rates affect all sectors of the economy. While they might have a negative impact in some areas, there are others where higher rates can be beneficial.

Some people may choose to spend less when interest rates are high, but this could also be a good time to invest in certain areas. For example, if you’re thinking of buying a home, a higher interest rate may mean that you’ll have to pay less each month for your mortgage. It will also likely mean that the value of your home, along with other investments you make during this time, could appreciate at a faster-than-average rate.

Wealth management during this period of inflation can be difficult, but if done correctly, it can lead to financial stability.

Protect Your Wealth in Any Economy

As you can see, increased interest rates have a lot of implications for consumers. But don’t worry—by paying attention to these trends and making smart decisions about where to invest your money, you can still work to grow your wealth.

With careful planning and a clear idea about your spending habits, you can take control of your money situation. Check out our other blogs to learn more about how to protect your assets during periods of economic instability.

Digital Banking

Sports sponsorships by crypto apps skyrocket in the past year

ByCFI.co Blogger

The sports sector has become the ideal target for some of the best crypto apps seeking growth. Some of the largest players in the cryptocurrency sector have announced strategic deals with sports clubs, leagues and organizations to attract new audiences.

Best crypto apps scramble for sports partnerships

The crypto space has grown significantly over the past year, and sports franchises have been open to securing deals in the world of cryptocurrencies. Some of the most reputable athletes have also pocketed deals, such as being brand ambassadors of some crypto projects or accepting their salaries in crypto assets.

Last year, some of the largest crypto sports sponsorships were recorded. The sponsorship deals were worth around $1.2 billion in total. One of the greatest sports deals secured last year was by Crypto.com. The exchange acquired naming rights for the Staples Center in Los Angeles for $700 million. They also spent another $210M in a major deal with UFC.

However, Crypto.com is not the only crypto app tapping into sports deals. FTX has also secured several major deals, including the naming rights to the Miami Heat arena last year. FTX also invested $210M for a sponsorship deal with TSM.

Other top exchanges like Binance and Coinbase are also investing in the space. Binance, the world’s largest exchange by trading volumes, was the major partner for the Africa Cup of Nations (AFCON) tournament. Coinbase is also the cryptocurrency exchange for the NBA.

Regarding the number of sports sponsorship deals secured, eToro stands out, having secured 36 sports deals with football teams based in Europe.

Football attracts more deals

The crypto industry is yearning to attract sports enthusiasts by marketing during major competitions. For instance, Super Bowl, the most televised sports event in the US with an over 90 million audience, attracted advertisements from leading crypto exchanges.

Football has attracted more sports deals than any other sport. At least 56 sports partnerships have been with football clubs, tournaments and players. Football is one of the most-watched sports globally, and it makes sense that crypto apps are focusing most of their attention here.

However, partnerships with football clubs have also attracted attention from regulators. For instance, Arsenal was banned from promoting its fan tokens last year. Liverpool fans also criticized the club’s decision to release a non-fungible token (NFT) collection.

Sports players are also venturing into crypto

Sports players are also entering the crypto space. Odell Beckham Jr, an NFL star, became among the first marquee sports players to receive a salary in Bitcoin. Around 8 NFL players accept part or all of their salaries in digital currencies.

After signing for the Jacksonville Jaguars last year, Trevor Lawrence agreed to take a huge share of his $24M signing bonus in several digital currencies, including Bitcoin (BTC), Ethereum (ETH) and Solana (SOL).

Bitcoin has particularly become the top option chosen by players who want to receive their wages in digital currencies. However, fan tokens are also becoming a favourite, with Lionel Messi accepting PSG fan tokens after joining the French club last year.

Banking

Investment Banking for Beginners: What You Need to Know

ByCFI.co

Did you know that the average investment banker makes more than eighty thousand dollars a year? And that’s before any bonuses that they receive.

Not only is it possible to make a big difference in the world as an investment banker, but you can also make a lot of money. Unfortunately, many people choose not to pursue these types of careers because they don’t understand what is investment banking.

To help you make sense of what it’s all about, we’ve created this guide. If you want to learn more, read on and we’ll tell you what’s important to know.

What Investment Banks Do

Most people have no idea what investment bankers do. They know that it’s an important career, but they aren’t certain why this is.

It’s incorrect to think that investment banking is all about greedy people in business suits who think about nothing else except their next investment opportunity. This is because more and more people are choosing to take ownership of their own financial futures by making investments in assets that will increase in value.

In most situations, this involves developing relationships with investment bankers. While traditional banks mainly take deposits and lend money to people and companies, investment banks sell securities.

It’s common for investment banks to invest the profits from these securities into big projects that traditional banks might consider to be too much of a risk. Here are some of the most common kinds of projects that investment banks tend to get involved in.

Offering Finances for Big Projects

Many investment banks invest their money in large infrastructure projects such as building roads and bridges. These kinds of projects need huge amounts of money to complete. Investment banks invest money into these projects with the belief that they will generate revenue once they’re completed.

Investing in Companies

It’s common for young companies to seek help from investors. Even though many company owners invest their own money to start their companies, this isn’t usually enough. This is why they often choose to create an initial public offering (IPO).

The basic idea behind an IPO is for a business to sell itself to the public. It’s the job of investment bankers to find investors who want to buy securities from these companies.

Mergers or Aquisitions

When it’s in a certain company’s interest to acquire or merge with another company, they seek help from investment bankers to seal the deal. Investment bankers often provide companies with the financing they need to acquire or merge with other companies.

Managing Assets and Offering Brokerage Services

One of the fundamental goals of investment bankers is to make investments in areas where it’s likely to bring returns. They often do this by acquiring clients who trust their investment bankers to manage their money. Investment bankers do this by choosing individual stocks or by finding mutual funds.

The Demographics of Investment Banking

Just like other forms of banking, the investment banking industry is dominated by white men. Less than twenty per cent of members of boards of directors are minorities. Less than thirty per cent are women.

Most people who work as investment bankers know that this is an issue. This is why it’s becoming more common for banks to create diversity programs. The aim of these programs is to seek-out qualified women and minorities to work for their companies.

How to Get Your Start as an Investment Banker

Since it’s important for investment bankers to know how to make deals, they need to know how to sell themselves. This means that you need to know how to convince people to hire you if you want to become an investment banker.

At the very least, it’s essential that you have a bachelor’s degree in business or economics from a respected school. Most investment bankers also have advanced degrees in business and mathematics.

It’s also important to be a good networker if you want to become an investment banker. Most people get started by becoming interns at reputable firms.

What Are the Best Investment Banks?

The biggest investment banks are JPMorgan, Barclays Bank plc, Goldman Sachs, Citigroup, Morgan Stanley, Deutsche Bank, and UBS. There are also hundreds of smaller investment banks that do business in countries around the world.

Most of the largest investment banks generate revenues of more than a billion dollars. Clients of the largest investment banks include retail companies, hedge fund managers, and governments. People with pension funds or who have investments also indirectly do business with investment banks.

The Difference Between Investment Banks and Retail Banks

Retail banks usually work with individuals by taking in their deposits. In exchange for putting your money into a bank, these people accrue interest on their savings. Retail banks also lend money to people who need to do things such as buy a new house.

Investment banks work mainly with large companies that need lots of capital. If you run a start-up or a small business, chances are that you’ll do business with commercial banks rather than with investment banks.

In most situations, investment banks do not do business with individual clients. They are more likely to invest in large companies and projects.

What Is Investment Banking: A Multi-Billion Dollar Industry

If you’ve been wondering “what is investment banking?” it’s important to understand how different investment banks are from retail banks. While most retail banks do business with individual clients, the majority of investment banks invest in large projects and corporations.

If you found this article helpful, don’t forget to check out the other informative articles that we’ve included in our Banking dropdown. Regardless of whether you own a business or are an individual investor, we have many helpful resources.

Digital Banking

What Is Digital Banking?

ByCFI.co

There are now 14 million people in the UK who have a digital-only bank account. 76% of citizens have also used an online banking service in the last 12 months. But, do you know what these services are?

Both digital and online banking have some major differences. Read on as we answer the question “What is digital banking?”

What Is a Digital Bank?

A digital bank is a financial institution that has all of its operations online. Services that were previously available at physical branches can be undertaken in browsers, mobile applications and digital environments.

They do not have brick-and-mortar premises but exist solely through digital means.

What Is Digital Banking?

Digital banking involves transforming all activities, processes and banking products into digital transactions. This allows them to be done anywhere with internet access, making banking much easier for the consumer. Most services are 24 hours and do not require a staff member to be present in a bank.

Obtaining Records and Statements

Transferring Funds

Withdrawing Cash

Bill Payments

Account Management

Monitoring of Transactions

There are also many advantages for the bank itself. As many processes can be automated, it reduces human error and the labour required for repetitive tasks.

What Is the Difference Between Digital and Online Banking?

These two terms may seem interchangeable. However, there are two key differences between them.

Online banking works through internet access. It has several basic banking products and functions. However, the system has limitations and it can not expand to add further services to consumers.

You would find this in use with traditional institutions that have added internet banking as an additional service. It works alongside their other operations.

Digital banking is more in-depth and flexible. It has API, automation and web-based service at its core. This means it can provide more security and cost-efficiency.

A digital bank exists solely online. You don’t have branches you can walk into to make deposits and consult staff face to face.

If you want the ability to expand and add extra features, then digital banking is key. Metrics and analytics taken from it can help improve the customer journey.

There is a third option: Mobile Banking. This is when banks create a designated application so that customers can perform services on their mobile devices.

Benefits of Digital Banking

Digital banking has several benefits. It is changing at a rapid rate bringing advantages for consumers, business owners and the banks themselves.

Increased Accessibility

Digital banking means residential customers, businesses and their employees can access banking anytime. All they need is a device and internet access. They can approve expenses, make purchases and transfer balances.

This can take place anywhere. It may be in the office, on a commute or on a business trip. With the addition of mobile banking, it becomes even easier.

Improved Customer Experience

A well designed digital banking system also creates a better user experience. Chatbots are often available to assist customers with any problems or queries. This improves customer service while minimizing the workload of staff in the bank themselves.

Not only can tasks like scheduled bill payments be set up, but tools for financial management are also provided. Statistics on spending and saving along with financial planning are available.

Central Account Management

With digital banking, all departments can be accessed from one location. This means you don’t have to deal with different representatives. With mobile banking, you can even download multiple apps to represent your different accounts.

Lower Costs

Fully digital banks operate with lower overheads as they have less staff and no physical premises to operate from. They can offer higher yields on savings, lower interest rates on loans and reduced fees as a result. This is often done to attract customers who may normally get put off by the absence of a physical store.

Benefits to Employees

From small businesses to large corporations, digital banking can provide a huge opportunity for employees. With digital banking for businesses, you can assign several corporate cards to employees who may need access to faster means of purchasing to do their job.

With real-time metrics and analytics monitoring, business spending also becomes easier. Reviewing spending by category and approving purchases or expenses instantly is an advantage. Policies can be created and individual thresholds set for individual employees on spending.

By providing financial autonomy, you empower your individuals. At the same time, you also retain control over the finances of the business.

Limits of Digital Banking

While it has many advantages, digital banking should be viewed as a bridge. It can never replace the interaction you get at a branch and some transactions, such as deposits of cash and withdrawals, can not be performed.

To get around this, digital banks usually allow cash deposits in designated partner retail outlets. However, this can often incur a larger fee.

Future of Digital Banking

Digital banking provides flexibility, but customer needs are bound to change. This means a modular infrastructure needs to change with them. What works now may not do in one or two years.

Many banks are now starting to adapt and incorporate digital asset transactions and management into their infrastructure. This includes digital payment wallets and transfers. All of this is provided alongside the standard services for fiat currencies that people need.

Starting with Digital Banking

Now you can answer the question “What is digital banking?”, you just need to find the services that fit your needs. Not all banks will have the same offers. Make sure you look to see what you need and who can make the best provisions.

If you found this article helpful, CFI.CO blog has many more to help. From banking to finance, we can get the most from your money. Click here to see all our business articles and let us help your business boom in the coming year.

Banking

Banking Tips :7 Reasons to Open a Bank Account For Your Small Business

ByCFI.co

Did you know that over 20% of small businesses in the U.K. don’t make it past the first year? One of the biggest contributors to this is using the same account for their business and personal finances.

When you’re just starting as an entrepreneur, it can be tough to figure out the best way to manage your finances. Do you keep everything separate? Do you combine your personal and business money?

While there’s no one right answer, most small business owners find it best to open a bank account specifically for their business. This is one of the most essential business banking tips to consider.

Here are seven reasons why you should consider doing the same:

1. Makes Tax Preparation Easier HMRC

Separating your business and personal accounting makes tax preparation easier because it helps you differentiate what is and isn’t taxable income. This can save you a lot of time and money when it comes time to file your taxes.

It also helps you automate your tax preparation process. With separate finances, it’s easier for your accountant to link all business-related transactions on your account to your tax preparation software.

With a separate account, you don’t have to spend countless hours sorting through different expenses, trying to figure out which are personal and business-related. This makes it easier to determine deductions come tax season.

And a bonus benefit is that it minimizes your risk of being audited. The HMRC is more likely to audit business owners who mix their personal and business finances.

2. Automates Your Bookkeeping

Keeping track of your business finances can be a daunting task. But when everything is in one place, and all transactions are automatically recorded, it makes the process of bookkeeping much simpler.

Bookkeeping automation also means you have a more accurate record of your business finances. This information can help you make informed business decisions to improve your financial health.

3. It’s Easier to Get Business Loans

When you have a business bank account, lenders know that you’re serious about your business. It also shows that you’re taking the necessary steps to protect your finances. This makes it easier to get a business loan to expand or grow your business.

Having a business bank account also shows that you’re able to handle money responsibly. This is an important trait for any business owner looking for additional financing. The last thing a lender wants is to risk their money on a business that may not be able to repay the loan.

4. Helps You Manage Your Expenses

When you have a business account, all your business transactions will be organized in one place. This makes it simpler to keep track of your spending. It can also help you stay on budget and make informed business decisions.

When you have a business bank account, you’re also able to receive payments from customers. This makes it easy for them to pay and reduces the chances of them forgetting. It’s also a great way to build customer loyalty.

When you’re looking for a business bank account, it’s important to find one that fits your needs. Make sure to compare interest rates, fees and other features. Don’t forget to ask about the bank’s lending capabilities.

5. Protect Yourself from Business Debt Liability

When running a company, it’s important to protect yourself from business debt liability. By opening a business bank account, you can help ensure that your personal finances are not liable for any business debts.

Business debt liability is the legal responsibility of a business owner for the debts of their company. This can include personal credit cards, lines of credit, and loans taken out in the name of the business.

If the business goes bankrupt or defaults on its payments, the creditors can go after the business owner’s personal assets to cover the debt.

A business bank account helps to protect your personal assets by keeping your business and personal finances separate. This way, if the business goes bankrupt, the creditors can only go after the assets of the company, not your personal belongings.

6. Show the HMRC That Your Business Is Not a Hobby

A business bank account provides a clear separation between your personal and business finances, making it easier to track your business expenses and income. When you file your taxes, having a business bank account can help prove that your company is a legitimate business and not just a hobby.

If you are self-employed, it’s important to have a business bank account to track your business income and expenses. A business bank account can also help you save money on taxes.

By deducting your business expenses from your business income, you can lower your taxable income.

7. Helps You Establish Business Credibility

When you’re starting a small business, it’s important to establish credibility with your customers and vendors. One way to do that is by having a business bank account. A commercial bank will take you more seriously when you’re doing transactions and may be more likely to give you a loan if you need one.

Having a business banking relationship also shows that you’re a professional and are serious about your business. Additionally, a business bank account helps you look more professional.

It looks much more professional to have all of your transactions taking place through a dedicated business bank account instead of mixing your personal and professional finances together.

Follow the Above Banking Tips

When launching your first business, it can be tempting to mix your personal and business finances. After all, starting a business is a lot of work and opening a business account isn’t a priority for many.

Unfortunately, this mistake could cost you dearly down the road. By opening a business bank account, you can protect yourself from business debt liability, show the HMRC that your business is legitimate, and establish credibility with your customers and vendors.

For more business finance and banking tips, subscribe to our CFI.co Print Magazine.

Investment Banking

Investment Banking vs. Retail Banking? What’s the Difference

ByCFI.co

Whether you prefer to bank online or at a physical location, there are a few differences between retail and investment banking. The investment banking world deals with high prices and high levels of competition. Retail banks are generally volume-driven.

In fact, the investment banking market is expected to reach just south of $140 billion in the next few years.

Regardless of the amount, both provide necessary financial services for customers big and small. Curious to know more about the differences between the two? Continue reading for an overview of the key differences between them.

Retail Banking

When you picture a physical bank, you’re most likely picturing a retail bank. These retail banks provide a way for the general public to conduct their everyday banking needs onsite. Some of the basic services offered at a retail bank include:

Checking accounts
Savings accounts
Certificates of deposit
Personal lines of credit
Mortgages
Auto loans
Credit cards

The main services utilized at a retail bank generally relate to checking and savings accounts to deposit and withdraw funds. Retail banks also allow consumers to build their credit via credit cards or auto loans.

While physical branches do exist, more and more retail banks are moving online.

Investment Banking

Investment banking falls under the corporate banking umbrella. It generally serves a different clientele. They focus on an institutional client base as opposed to individuals.

Investment banks serve institutional needs and provide advisory services related to capital markets. Some of these areas include:

Equity markets
Bond markets
Portfolio management
Mergers and acquisitions
Equipment lending
Syndicated loans

Investment bank services operate on a larger scale in terms of complex transactions.

Main Differences Between Them

In terms of financial services offered, some of the main differences between the two can be broken down as follows. A few differences relating to retail banks include:

Catering more toward the general public
Managing lesser sums of money
Granting access to individual services

A few services for investment banks include:

Catering to larger institutions
Handling complex sums of money
Providing corporate services

These may be overly simplified summations. However, both types of banking handle a variety of finance-related transactions. Some are at the consumer level, and some are at the corporate level.

When to Choose an Investment Bank

For corporate mergers or startup company IPO launch preparation, investment banks and bankers are heavily involved.

Whether it’s a public company or a private one, choosing the best investment bank can make all the difference. This helps to obtain a successful financing deal, valuation, or initial public offering.

Having the right team behind a transaction will help. First and foremost, it helps determine whether a deal gets completed. Investment banking teams exist to help companies navigate through the complex and often unwieldy process of something like an IPO. They are trained to manage complex projects with transparency and efficiency.

The operations of a team of investment bankers could be divided into three functions:

Financial advisors
Mergers and acquisitions
Research

Operations of Investment Banking

A normal bank facilitates transactions at an individual customer level. Investment banks facilitate transactions for businesses and institutions. The transactions themselves are more unique when it comes to investment banking, thus bringing in the need for specific teams to complete said transactions.

Financial advisors provide a strategic outline of short-term and long-term business goals. They also provide a thorough understanding of industry trends and global markets.

Investment banks also facilitate mergers and acquisitions, which involve estimating a company’s valuation. The process ultimately ends in price negotiation and facilitation of the acquisition itself.

The Role of Research

Investment banks also have research divisions that provide investment advice for clients. The research branch is able to advise clients by keeping on top of knowledge in areas such as:

Credit research
Fixed income research
Macroeconomic research
Quantitative analysis

Research teams are highly knowledgeable. A good research team is well-sought after by companies during the process of financing a deal.

To Summarize

There are many differences between the operations of retail banking and investment banking. One of the key differences to remember is the type of client to which services are offered.

Retail banking, in general, exists to offer financial services to individuals. Investment banking is geared toward commercial or corporate use.

Investment banks exist to expand products offerings and increase market shares. They work as intermediaries between financial markets and organizations. Responsibilities also include:

Helping issue shares of stock
Counsel during the pre-underwriting stage
Counsel during securities distribution stage
Examination of financial statements
Organizing prospectus information for potential investors

Retail banks provide customer service and financial advice on a more individualized level. Retail banks also provide underwriting services for products such as home mortgages and auto loans. Retail banks provide a way for the average customer to deposit cash, withdraw funds, and extend credit.

An Investment in Banking

From mergers to everyday cash deposits, banking systems today accommodate a wide range of clients and services. The world of banking saw many changes as a result of the global pandemic. Markets shifted from previous patterns. Previously in-person transactions moved online.

However, both investment banking and retail banking do have one commonality that remains the same. They exist to serve their clients and their clients’ success.

If you found any of the above information helpful, be sure to check out any of the additional articles we have listed in our Banking dropdown. We offer plenty of resources for businesses and individuals alike.

Banking

Here’s What to Do to Keep Your Retail Bank’s Customers Happy

ByCFI.co Blogger

Many of today’s average retail banking customers are considered “digital natives,” or people who have grown up and gotten acclimatized to the ubiquitous presence of technology. It is now like second nature for many customers to use their bank’s core technologies to pay their household bills, settle their loan payments, or transfer for personal and business purposes—all in just minutes, using only a computer or a mobile phone.

retail banking

Banks have taken notice, and many have gone the extra mile and shifted into more digitally driven retail banking models. This likely holds true for your own bank and its retail banking program. However, the fight to hold on to your market share won’t be an easy one. There’s no guarantee that you’ll keep all your retail banking customers loyal to your brand, or that you’ll attract as many new customers as you hope to, just because you’ve undergone a digital transformation. Like-minded financial institutions have attempted to do the same, which makes it a pretty tight race to the top of the retail banking industry.

Knowing just how stiff the competition is, what can you do to satisfy your current retail banking customers—and better yet, how can you get them to recommend your bank to others? To answer that question, here are five useful tips to strengthen your retail banking efforts.

Open Up Different Touchpoints for Retail Banking

Some of your retail customers may still choose to go the traditional route and settle their banking transactions over the counter. However, a large chunk of them will want multiple touchpoints with your banking ecosystem, for example through their smartphones, tablets, laptops, and even wearables. One way that you can keep them satisfied is to invest in technology that makes instant, round-the-clock omnichannel banking easy for you to handle. Consider onboarding a digital banking platform that will allow you full dexterity when managing your retail customers’ banking journeys across multiple channels.

Make It a Breeze to Open New Retail Banking Accounts

How do you win over a new crop of retail banking customers who are deciding between your brand and another brand? The answer lies in making sure that their first experience with your bank—i.e., opening an account—is a simple and pleasant one. Revisit your current customer enrollment processes to streamline them and remove redundancies, without compromising on your know your customer (KYC) and customer due diligence (CDD) standards.

Deliver Innovative New Products That Fit Your Customers’ Life Stages

Next, look for ways to bolster your bank’s product development for its retail banking offerings. Sticking with the same lineup of generic-looking account offerings, and failing to communicate what kind of customer they’re actually for, will result in the stagnation of your retail banking program. Try innovating your roster of products to include distinct perks, for example rewards points for thrifty customers. You can also enter into a bancassurance agreement with an insurance carrier to give young, health-conscious, or especially pragmatic customers additional insurance benefits with their account. If your products can truly resonate with your retail customers’ needs and values at specific stages in their life, you’ll have an edge over your competitors.

Improve the User-Friendliness of Your Retail Banking Platforms’ Interfaces

Given how often retail banking customers turn to their banking apps and websites, it helps for a bank to invest in enhanced user experience (UX) for these channels. When you do this for your own retail banking channels, aim for simple, streamlined, and intuitive UX that makes it a pleasure to transact through your bank’s system. Your customers may consider leaving your bank if your interfaces are confusing, tiresome, and difficult to navigate. The opposite also applies: you’ll cultivate a loyal following among your retail customers if they can associate your brand with great UX.

Offer Multiple Options for Customer Care and Engagement

Gone are the days of relying only on telephone hotlines to address customer service concerns. You should expect your customers to want to reach out to you through multiple mediums, for example through email, chat, and even social media. You’ll be able to decongest the high volume of retail banking requests and increase the efficiency of your customer care by employing technologies like automation and artificial intelligence. Automate and use chatbots for relatively simple process flows while letting your customer care team resolve more complex problems. If you can already anticipate that your customers want speed, accuracy, and thoroughness in the resolution of their concerns, be proactive when it comes to strengthening your customer care.

Final Words: Customer Satisfaction Plays a Big Role in the Success of Your Retail Banking Program

Your retail customers account for a huge part of your bank’s existing clientele. The happiest of them will serve as effective brand ambassadors for your bank, especially to new customers who are still deciding on a provider. Make it a priority to improve upon your retail customers’ satisfaction, and you’ll be able to take your retail banking program to new heights.

Banking

How Does a Mortgage Work? The Ultimate Guide

ByCFI.co

Between the different types of mortgages and the seemingly endless amounts of mortgage paperwork, buying a home may seem overwhelming. But how does a mortgage work exactly? We have all the answers to that mystery and more.

No home or homeowner is the same, which is why it’s so crucial to understand how to get the best mortgage for you. From how the mortgage process works to some qualification tips, we’ve rounded up all the key mortgage basics. Let’s get started and get you one step closer to your new home.

How Does a Mortgage Work?

A mortgage is essentially a loan taken out from a bank or financial institution to give you funding for a home. You can choose to finance almost the entire home or do a combination of financing and money down.

Whatever money you put down on the purchase comes from your own cash reserves. Money down reduces the amount you have left to pay on the home through your mortgage loan. Your mortgage loan is given with interest rates that may vary or be fixed each month

A mortgage is also considered an instalment loan. This means the payments are paid monthly or bi-weekly in instalments. You’ll pay your principal balance as well as the interest, fees associated with the loan, taxes, and insurance. You may have a mortgage for 30-years, 15-years, or less if you choose.

As the years go by, your mortgage is paid down each month. Once your home is paid off, you’ll no longer have a mortgage and you’ll fully own your home. In the event that you sell your home before it’s paid off, you will need to pay off the loan at the time of the sale.

Failure to pay your mortgage could have serious consequences such as foreclosure. This is why the mortgage qualification process is put in place to ensure you’re in a loan and a home you can comfortably afford. This makes your mortgage less risky for you and your lender.

How to Qualify for a Mortgage

While qualifying for a mortgage may seem overwhelming, it doesn’t have to be. There are a few easy things you can do before you apply to help make the process easier. Creating a budget is a great starting point.

Your budget will help you and your lender determine what loan amount you’re most comfortable with. Start by laying out your expenses and income. Take a look at your down payment amount to see how much you’re comfortable putting down as well.

Next, it’s time to look at your credit and try to reduce any other debt you may have. This is where your budget can help you make a plan for paying off credit cards and reducing your spending. Your credit score will affect everything from your loan terms to your interest rate.

The higher your credit score, the better your interest rate will be. A lower interest rate allows you to pay more of your principal balance. This means more money is spent on interest each month.

Key Considerations When Shopping for a Mortgage

Another key consideration when shopping for a mortgage is how much you’re budgeting for a home. The type of home is also a factor.

A condominium, for example, may have an association fee you pay each month for amenities. This will get factored into your qualification, as it’s a fixed expense you’re responsible for.

If you’re purchasing new construction or a fixer-upper, your loan options may differ as well. When you have a home that needs a lot of work, you may choose to put less down on your home. This will allow you more cash for renovations and repairs.

As you’re going through the application process, look over all the loan options you qualify for. Your bank will need to know your budget, down payment, income, and other factors to help you find the best mortgage for you and your family.

Home Buying Tips

Before you apply for a mortgage, it can be helpful to take a look at your local real estate market. This will help you come up with your ideal home and budget.

You may find your budget gets you more than you think. You may also realize you need to prioritize your wish list.

This is a great time to make a list of what is most important to you in a home. For some, it’s the proximity to a certain school. To others, it’s the commute to work or the number of bedrooms. Your wish list will help you come up with a budget and a target price range as you start to house hunt.

As you start to look at homes, it’s also helpful to get a mortgage pre-qualification. This will allow you to make an offer on a home while knowing what you’re approved for. This helps you know where you stand while also making your offer stronger as a potential buyer.

Getting a Mortgage 101

Wondering how does a mortgage work? You’ve come to the right place. We have wealth management, mortgage, investment, and financial resources to help you make an informed decision.

Your home is likely one of your biggest assets. Read up on mortgage rates, the economy, and the housing market in our wealth management section.

Investment Banking

How Much Do You Need To Invest in Real Estate?

ByCFI.co

In an overwhelming majority of countries, real estate costs continue to rise due to low-interest rates and supply chain disruptions.

Yet, while housing prices are sky-high, investing in real estate has never been easier. You might think buying real estate is only for the wealthy, but you would be wrong.

The truth is, you can start buying real estate investments for as little as $1,000. Don’t believe me?

Then keep reading as we explore the question, “How much do you need to invest in real estate?” We guarantee it’s feasible for you. Besides, one of the best investing tips is to diversify your portfolio, which real estate will help you do.

Real Estate Investment Trust (REIT)

The cheapest way to invest in real estate is through a REIT. They allow you to invest in real estate without the actual real estate.

What does that mean?

REITs are similar to mutual funds as in they are securities. Investors trade REITs on major exchanges like stocks. REITs own commercial real estate like:

Apartments
Hotels
Office buildings
Retail spaces
Shopping malls

Most REITs specialise in a particular type of real estate or specific region.

REITs offer a high dividend and a liquid way to invest in real estate. In addition, it’s easy to reinvest dividends to grow your investment further.

When investing in REITs, experts say to stick with publicly-traded REITs, which you can buy from brokerage firms.

As mentioned, you can invest in REITs for $1,000!

Real Estate Investment Group (REIG)

If you’re an investor who wants to own physical real estate rather than shares of a company, then you may want to consider an REIG.

An REIG allows you to buy one or more units in an apartment or condo building via an operating company. The operating company manages and markets the units. Then, the operating company takes a percentage of the monthly rent.

REIGS are a cost-effective way to invest in real estate because you don’t have to succumb to the management work.

Some partnerships accept investments as low as $5,000 or up to $50,000. So while it’s not enough to purchase a property, when several investors come together, they can co-own property and make a profit.

If you want to invest in an REIG, you want to look for one that pays a monthly cash return on your investment.

Crowdfunding

Similar to REIGs, crowdfunding is becoming more popular in real estate investing. It allows you to pool your money with other investors to fund commercial real estate investments.

For example, a developer wants to buy an apartment complex for $3mn, make $1mn worth of renovations, and resell the complex for $6mn.

The developer can borrow $2mn from the bank and contribute $500,000 of their own money, but they still need $1.5mn for the project.

They can raise the rest of the capital via crowdfunding. Those who invest will share the profits. You could be one of those investors. Each crowdfunding project has its own minimum contribution.

A typical contribution amount is $25,000, far less than outright buying a property.

Buy Property

Of course, you can also buy property as a way to invest in real estate. In general, this will require more money upfront. However, you can buy a property with as little as 3-5% down, depending on the location and lender.

If you choose to invest in property by buying directly, know that it is time-consuming but can see considerable returns. You can profit from purchasing property in two main ways: becoming a landlord or flipping.

Rental Properties

Becoming a landlord can offer long-term income and capital growth. But it’s also a lot of work. You need to find and vet tenants, keep up with property maintenance and continue paying the expenses.

It’s a good investment if you have the time and money to manage the property. It’s even better if you can afford to hire a property management company so you can focus your time on other investing projects.

Fix and Flip

If HGTV is famous for anything, it’s flipping houses. When flipping, you buy a property, revamp it, then resell it.

The best way to flip properties is to find the unvalued ones. This means looking for foreclosed homes, short sales, and abandoned properties. This is because you want to pay the least amount possible for a property to maximise your return after remodelling.

When flipping, you go through a different loan process. It’s best to pay cash, but if you need financing, you’ll want to have some wiggle room. Every property has different funding requirements based on its current condition.

If you have enough money to pay cash or put down a large downpayment comfortably, it’s a good investment option.

Fees When Buying

While purchasing a property with 3-5% down is possible, it’s not always the best financial decision. You could be left with a higher interest rate, and your mortgage payments will be bigger.

If you’re able to put 15-20% down, it’s a better choice to do so. Going into debt to make money requires balance and strategy. Borrow too much money, and you may fail to pay it all back.

Additionally, when buying a property, you have to remember you’ll be responsible for paying all the fees, not just the mortgage. This includes:

Closing costs
Property taxes
Homeowners insurance
HOA fees
Maintenance and repairs

If you rent out the property, these fees will remain your responsibility. However, if you sell the property, you won’t have to continue paying them once you sell.

But, you must factor these costs into your budget because you need to pay them as long as you’re the owner.

How Much Do You Need To Invest in Real Estate, Explained

To invest in real estate, you don’t need a lot of money. A few thousand dollars can help you generate wealth and move on to bigger and better-investing projects.

Rather than pondering the question, “How much do you need to invest in real estate?” take the money you have and find a viable investment.

If you’re still unsure about getting started, check out our real estate investing for beginners article to help you.

Banking

Opening a Savings Account: A Guide for Young Adults

ByCFI.co

Did you want to start planning for your financial future? One of the best ways to ensure you’ll stay financially stable is to open a savings account. Savings accounts give you the flexibility to undergo unexpected financial hardships. They also help you plan for major life events, such as buying a house or car. It’s best to start saving as young as possible. As such, young adults should open a savings account as soon as they can.

Below, we’ll get into the basics of opening a savings account. Keep reading to start planning for your financial future today!

Compare Financial Institutions

Before you open your first savings account, you need to compare financial institutions. Many different banks offer savings accounts, but they’re not all created equal. Some savings accounts put you in a much better financial position than others.

Young adults often get trapped in these poor financial situations because they don’t know which things to look for when they open a savings account. You should compare a few different aspects before you decide on a financial institution.

Interest Rates

First, compare interest rates. When you place your money in a savings account, it will accrue more money over time. As such, you can actually gain more money by leaving your cash in a savings account.

Yet, not all interest rates are the same. In fact, banks often offer low interest rates. Sometimes, they’re even as low as 0.01%! So, you should look at the interest rate before you decide to open a savings account with a certain bank.

If you want to grow your wealth faster, you should invest and save at the same time. Buying reliable will help your wealth bloom. Still, you need to make sure your stocks don’t have a high level of risk. Investing in the wrong stocks can cause you to lose money as the market fluctuates.

The Minimum Requirement

Some savings accounts require you to have a minimum amount in them. If you don’t keep the minimum amount in the account, you may incur fees and penalties.

Some savings accounts don’t have a minimum amount. This is ideal since you’ll have the ability to take out as much money as you need.

Don’t worry if your best savings account option will have a minimum amount. But you should make sure it isn’t high.

No Monthly Fee

Even though banks have low interest rates, they might also have monthly fees.

These might be as low as $5, but they can pile up over time. Usually, you get charged this amount when you don’t have a certain balance in your savings account.

So, if there is a monthly fee, you should figure out how easy it will be for you to avoid.

The Opening Deposit

When you open a savings account, you might have to pay an opening deposit.

Sometimes, this is as little as $25. Yet, some people want their first deposit to be smaller. You’ll need to make sure you can afford to put the minimum savings amount in your account. So, take stock of your financial situation first. Then, decide which account allows you to make the first deposit that best meets your needs.

Look for Automated Transfers

Saving money is easy to talk about and much harder to do. If you have to manually put money in your account, you might forget to do it. You might also struggle to want to put your money in a savings account on a regular basis.

To get around this, many banks offer automated transfers. You’ll get to pick a date and a certain amount of money. Then, the bank will draw money out of your account every month on the specified day.

When you choose your date, you should think about when you need to pay your monthly expenses. Many people choose a date after their payday. Others pick a day after they pay for other necessities, like rent.

Once you know how much will go into savings, work it into your monthly budget. Consider it a necessary expense so you ensure you make enough money to keep it up.

Get Your Required Documents Together

Banks often require people to present a few documents in order to open a bank account. This is to prevent identity theft and fraud.

You’ll need your social security number, your address, and a valid ID. Your ID should be a government-issued one, such as a passport or driver’s license. You may also need a document that proves your address. You will also need to provide your date of birth and contact information.

Make sure you contact the bank before you open the account. Ask them what you will need to give them so you can prepare the documents in advance.

Fill Out the Application

Next, fill out your bank’s application. Make sure you know how to contact your financial institution if you have questions.

At this point, the bank will require you to know whether you want an individual or joint account. An individual account is best for unmarried people or those who don’t want to merge their finances. A joint account allows two people to easily access your finances.

This makes it best for married people or those who want to share the account with another person.

Ready to Open a Savings Account with Young Adults?

Now that you’ve read this guide, you’re ready to open a savings account for young adults.

To make the most out of your savings, you should talk to a financial adviser. This person will help you plan for your life goals and big expenses. That way, you’ll be able to meet your objectives quicker.

Want more great advice? Check out more of our articles today!