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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.

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. 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

Fund Based Activities

a) Leasing Finance & Insurance
b) Venture Capital & Bill Discounting
c) Mutual Housing Finance & Factoring
d) Hire Purchase

Fees Based Activities

a) Credit Rating
b) Stock Broking Services
c) Merchant Banking

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.

Advantages of Modern approach over the traditional approach
a) Tremendous growth in economy
b) Deals with risk management with low operation cost
c) Introduced payment system and extraordinary decision making techniques
d) Well planned capital structure with effective administrative ability
e) Financial problems are viewed closer in modern approach

Disadvantages
a) Inefficiency of operational system
b) Interference of politicians and government
c) Intense competition


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