Approaches involved in Financial Services:
Figure out the common approaches of Financial Services.
- Traditional Activities
- Fund Based Activities
- Fees Based Activities
- Modern Activities
The approaches of financial service are considered as the essential part of the financing. Take a brief discussion about the approaches of financial services.
1. Traditional Activities:
At the earlier stage from 1920 to 1950, an approach is strictly followed in the financial service which is now changed as traditional approaches. This method works depends on the past experience as well the predefined rules and methods. The Traditional approaches of finance are further classified into two categories. Have a look about that approach.
Fund Based Activities:
In this method of fund based activity, the fund is transferred. Some of the Fund based Financial Services are as follows,
- Leasing Finance
- Venture Capital
- Mutual Housing Finance
- Hire Purchase
- Bill Discounting
Fees Based Activities:
Fees based activity in traditional approach cannot tend to any fund transformation. Listed below are some of the fees based Financial Services,
- Credit Rating
- Stock Broking Services
- Merchant Banking
Limitations of Traditional Approaches:
- Only focuses on fund obtaining and failed to consider other important aspects
- This approach has the limitations of transforming funds only to others.
- Not concentrated much more on the problems.
- Internal decision making is not taken into an account
2. Modern Activities
In order to overcome the limitations of Traditional approach a new approach is invented, which is latterly named as the modern approach of finance services. It has well-developed infrastructure when compared to traditional approaches.
The Advantages of Modern approach over the traditional approach in financial services:
- Tremendous growth in economy
- Deals with risk management
- Introduced payment system and extraordinary decision making techniques
- Operation cost is low
- Well planned capital structure with effective administrative ability
- Financial problems are viewed closer in modern approach
- Inefficiency of operational system
- Interference of politicians and government
- Intense competition