Banking Innovations

July 17, 1968

Report Outline
Entrance of Banks Into New Fields
Development of the Banking System
Competition in the Banking Business

Entrance of Banks Into New Fields

The banking business in the United States is growing at a rate that pleases even the bankers. Rising interest rates pushed up the earnings of commercial banks 10 to 15 per cent in the first quarter of 1968; during the past five years, those earnings have increased annually at an average rate of more than 7 per cent. While leading bankers are optimistic about the industry's prospects for steady growth, they are careful to make a distinction between banks which cling to traditional banking practices and banks which innovate.

During the 20-year period 1946–66, total deposits of commercial banks in the United States rose by 120 per cent. Although the volume of bank loans to business enterprises mounted in that period, the share of the bank loan total going to business—which amounted to 56 per cent in 1923—had declined to 45 per cent by 1966. Consumer loans, which were relatively unimportant 40 years earlier, accounted for 22.6 per cent of the total in 1966. Clearly, the banks had discovered the private customer and were engaged in active competition for his business.

Bankers now appear eager to replace the image of the yes-or-no traditionalist with that of the helpful innovator. Entry of banks into new fields, and particularly the trend toward a “checkless society,” show that the change is more than a matter of public relations gimmicks. One management consultant has asserted that “The difference between the well-managed banks and the ones whose managements can't come to grips with change is going to become wider and wider.”

ISSUE TRACKER for Related Reports
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Jul. 19, 1974  Banking Stability
Jul. 17, 1968  Banking Innovations
May 06, 1964  Monetary Policy in Prosperity
May 16, 1940  Revision of the Securities Acts
Feb. 27, 1937  Expansion of Branch Banking
Sep. 03, 1935  The Decline of Commercial Banking
Dec. 11, 1934  Proposals for a Government-Owned Central Bank
Sep. 12, 1934  Bank Reserves and Credit Inflation
Nov. 27, 1933  Bank Credit in Depression and Recovery
Aug. 12, 1933  Closed Banks and Banking Reform
Apr. 04, 1933  Unified Control of Banking
Apr. 09, 1932  The Glass Banking Bill
Mar. 24, 1932  The Guaranty of Bank Deposits
Apr. 17, 1930  The International Bank and the Gold Standard
Feb. 08, 1930  Branch Banking and Chain Banking
Apr. 29, 1929  Mergers of Banking Institutions
Oct. 28, 1927  The Federal Reserve Rate Controversy
May 21, 1927  Labor Banking and Finance Since 1920
Jan. 31, 1924  The Northwestern Bank Failures and the Attack on Treasury Savings Certificates
Dec. 01, 1923  Why State Banks Do Not Join the Federal Reserve System, the Effect on the System and the Issues Involved
Nov. 23, 1923  Branch Bank Controversy
Financial Institutions