Why is it not surprising that traditional banking has been in decline, explain the role of?

Question

Why is it not surprising that traditional banking has been in decline, explain the role of financial innovation in this process?

Answer 1

Traditional banking was banks based in communities, who's primary business was loans to long time customers as well as serving depositors. The loans were usually held to maturity by the bank, Now most banks sell their loans to investors who buy packages of securities or bundled loans, and banks function as mortgage brokers. As this happened the ties to the community diminished and many were taken over by large bank "chains" which have a competitive advantage in service to depositors, and they in turn are being replaced by Internet banking.

Answer 2

Since the late 90' Banking & Financial Institutions have been moving toward "internetization" due to financial innovation. Thus, reducing the "cost of doing business" or "transaction cost".

Now only is it convinient for consumers to Bank Online: saves a lot of time, especially in remote areas where traditional banks are not as abundunt; It cost more money to keep bankers on payroll, lease payments ...

Answer 3

It is easier to bank online than at the teller.