3 Ways Banks are Becoming Entrepreneurial

According to the dictionary, entrepreneurial means “willing to take risks to make a profit”.  Based on the years leading up to the financial crisis, that would be an accurate description of banking practices worldwide.  Banks were doing anything they thought they could to make a profit.  However, since 2009, it has been rare to see a bank take risks.

That is changing though, and more and more banks are becoming entrepreneurial once again.

1. Banks are Making Loans Again

The biggest change is that banks are willing to make loans again.  This includes car loans, home loans, and even loans to small business.  However, it is clear that banks are placing a much bigger emphasis on doing the proper due diligence prior to lending.  While this makes their investment a little safe, lending money is inherently risky.  But, it is what banks must do to make a profit, so that is a good sign.

2. Banks are Offering Credit Cards Again

Another positive sign that banks are becoming more entrepreneurial is that you are seeing more bank account offers for credit cards and other products.  Credit cards and other products can be risky business for banks, but they are also highly profitable because of fees and interest paid.  As such, it is important for banks to do this if they want to make money.

Banks are even offering business cards and rewards credit card, which carry even more risk because the rewards they pay out on the cards lowers the overall profit available to the bank in the end.

3. Investment Banks are Investing Again

If you’ve watched the new lately, you’ve undoubtedly heard about Morgan Stanley losing billions in a single bad trade.  Banks are betting on the stock market again in an attempt to seriously increase their profits, and this is clearly not without risk.  Trading is very risky business, but the profits can also be immense.  It is both a positive and negative that banks are trading billions of dollars in order to make an even bigger profit.