Understanding Financial Institutions: Segmentation, Operations, and Products

Market Segmentation in Financial Institutions

Segmentation in a financial institution can occur in response to different situations. For example, segments can be created for new entrepreneurs, youth, pensioners, or based on age, income level, workplace, or social groups, including Small and Medium-sized Enterprises (SMEs).

Physical vs. Online Financial Institutions

Internet:

• Lower operating costs
• Access to new technologies
• Potential for cost savings and improved quality of proposals
• Drawback: Lack of personal contact, leading to a perception of coldness

Physical Entities:

• Higher operating costs
• Proposals may be of lower quality compared to online offerings
• Advantage: Direct customer interaction fosters trust and reliability

Types of Operations in Financial Institutions

Financial institutions carry out various operations, broadly categorized as:

Passive Operations

These involve obtaining customer savings through various means, such as:

1. Current accounts
2. Savings accounts
3. Time deposits

These operations are termed "passive" because the balances received by banks, savings banks, and cooperatives form part of their liabilities.

Active Operations

These involve investing the institution's own funds and the money received from customers. Examples include:

1. Loans
2. Credits
3. Discounting of bills

Mediation Services

Initially, these services supported customers with collections and payments related to their banking operations. Over time, they expanded to include:

1. Receipt management
2. Payroll services
3. Credit card processing

Today, mediation services are a substantial part of a financial institution's activities and have fostered connections with sectors beyond traditional banking.

Liability Products of a Banking Entity

(Definition and three examples are needed here)

Active Products of a Banking Entity

(Definition and three examples are needed here)

Service Operations of a Financial Entity

Financial entities offer a range of services, including:

1. ATM access
2. Online banking
3. Direct debiting of bills
4. Credit card issuance
5. Bill collection management

Mediation services, as mentioned earlier, are a key component of these service operations. They originated as support for customer collections and payments and have evolved to encompass a wide array of services, such as receipt management, payroll services, and credit card processing. These services not only constitute a significant portion of a financial institution's activities but have also facilitated connections with sectors outside the traditional banking realm.