Banking has been a main standpoint of society across the world for centuries. Its roots can be traced back to 2000BC, when loans of grain were passed between farmers and merchants travelling between cities. By the time the Roman Empire was in its prime, lenders would be found in temples who would accept deposits and were able to change money.
The banking system as we know it today in the UK and US mainly emulates the Bank of England, which was established in 1964.
The Federal Reserve System
In 1913, the US government took control of the nation’s economy by way of the Federal Reserve System. Not dissimilar to The Bank of England, the Federal Reserve was intended to offer financial services to other financial institutions, the central government and the government of other countries.
While fundamentally banking is the same in the UK and US, there are a few differences between them.
All change
The first difference of note is of course the change of currency. While other countries in Europe have accepted the Euro, the UK still works with Pound Sterling (£). While the exchange rate is always fluctuating, the exchange rate usually flits around $1.50 to the Pound. This is worth bearing in mind when moving between the two countries.
It’s also an important point that while paper and coin money is still prevalent in the UK, in the US card and contact payments are considered the norm.
While there is the option to pay for items with chip and pin in the UK, the fact that the vast majority of cash machines don’t charge for withdrawal means that customers are happy to pay by cash. In the US, you can expect a charge when using an ATM.
For financial transactions such as mortgages and savings accounts, banks can be approached. However, something which is often chosen in place of banks are building societies.
What’s a building society?
The first ever building society was set up in Birmingham, England in 1775 with the intention of members pooling their funds to buy each member houses and land. Once all members were housed, the society would close.
In recent years, especially in the UK, consumers have been losing faith in banks. According to a survey by Yorkshire Building Society, 34% of consumers have lost faith in the financial sector than during the previous year. Building societies offer a little more security simply because of the way they are run.
Banks are businesses above anything else. As such, they’re usually listed on stock markets. With shareholders who don’t need an account at the bank being able to buy shares, a successful bank means shareholders are paid a dividend. Thus, they run under the premise of creating profit for their shareholders, banks don’t necessarily have a vested interest in their customers.
Building societies are owned by its members, who are also able to vote on changes and services. There’s more of a communal feel, and it’s not uncommon for building societies to have roots planted very firmly in the local community.
Takeaway
Whether you’re looking for somewhere to keep your personal savings or if you’re working in an SME, both circumstances require a secure location and management in order to make the very most of the money. However, this is where the similarity between the two situations ends and different priorities need to be considered before decided whether to use a bank or a building society.