Commercial banks are financial institutions that manage personal and business accounts. They make loans to people and small businesses and offer checking and savings accounts and certificates of deposit. These differ from investment banks, which manage securities and help manage mergers and acquisitions for larger businesses. Commercial banks hold a significant amount of worldwide wealth. For example, Chase Bank and Bank of America are both large commercial banking divisions of global banks, and have more than $2 trillion in assets each. Commercial banking has changed greatly during the pandemic, and there are several ways that the industry is changing.
The banking industry is greatly changing the way they interact with customers as they move to an increasingly digital system of money management. Banks are using digital solutions to solve paper money transactions, especially because of the WHO’s recommendation to use contactless payment. According to VP Avinash Prasad, “[banks] are using text message links for clients to fill out forms, upload documents, and sign through eSignature.”
Many banks have begun to change the way they invest their money and their customer base. Banks are becoming more careful as they weigh their revenue vs earnings, analyze the creditworthiness of their customers, and set aside a greater amount of reserves. According to business teacher Mrs. Uhl-Alba, many banks aren’t well-diversified, “especially regarding loan and business portfolios, [which] they are working quickly to change due to the unknown length of the pandemic and the effects that it has had on the economy.”
Commercial banks continue working to create a stable way to borrow during uncertain times.