The psychology of banking

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On understanding the motivations of bankers and customers in banking using insights from psychology…

As the financial markets go through rapid change and considerable turbulence, I thought I should do some psychology of banking. I’m going to avoid any economics and just focus on what it means to be a banker or an investor from a psychological standpoint. Of course, the driving force behind banking is money, and banks thrive on a consumer culture. Banks have various functions ranging from stabilizing an economy to stabilizing a person’s credit history and banks can have a commercial, investment, savings, retail, private or mortgage orientation. There are two ways to frame the psychology of banking. One way is to understand the psychology of the banker and the other is to get into the mind of the client or client/investor. Banking is like any other business but the only difference between banking and other business is that in case of banking both bankers and customers deal directly and only with money which can impact significant on the importance they attach to their banking operations. Money is something primary and raw, it’s almost like an object stimulating some kind of basic need, and the prospect of dealing with raw money is exciting and daunting.

The banker :

The banker’s psychology is based on his need for personal, social and political money. The banker is above all concerned with his own profits, with the amount he adds to his account and it is almost an addiction. Just as a tradesman or shop owner is obsessed with the goods available, the banker will be obsessed with the money he is able to lend, borrow, or do business with. The urgent need to make more money is what drives bankers in the first place. This could be seen as a “personal” need and a craving for money to meet largely personal needs. Any banker or investment or trading broker or anyone in the financial industry will likely have a healthy or unhealthy personal need for money. Of course, we all need and love money, but bankers are more focused on money.

Secondly, the banker being in love with money, concentrates not only on his money but also on the money of others. It is essential to understand that money remains the main object of attention for a banker and that the smell of money could make him rather altruistic, so there is a general or “social” need to protect and nurture as well other people’s money.

Third, the banker has a greater political need, whether he manipulates/controls his money or that of others, and this “political” need would arise from the understanding of the economic situation of the country and the awareness he has an active role to play in stabilizing the economy. .

While the primary personal need for money satisfies the basic drives of individuals, the social need to protect other people’s money is rather altruistic and the political need to stabilize a nation’s economy is largely a need for power. . A banker’s money therefore serves his altruistic desires, his needs for power and his personal desires. This can almost be explained psychologically with Maslow’s hierarchical model in which basic wants come first, followed by power needs, then altruistic needs. Considering this, any banker would be interested first in his own profits, second in the economy and the stability of the nation, and only ultimately concerned with his clients and investors.

Customers:

The second aspect of the discussion concerns how the bank could help infer the psychology of customers, clients or investors. There are different types of customers and people have different priorities or expectations of banks and bankers. Clients may have a borrowing need, an investment need, or a savings need depending on their age or stage of life. For example, young students and people with low incomes are interested in borrowing facilities through credit cards and loans and they see banks as a support to retain for their financial problems. Of course, borrowing is just as important for businessmen as it is for professionals, but the motivation may be different. The need for “borrowing” resulting in turn from personal or professional needs would be the most important reason for banking among young people and young people, students, graduates or people between two jobs or newly hired will be propelled towards the bank because of their borrowing needs. So, in general, 18-30 year olds are generally less interested in interest rates and more interested in the ease of borrowing they can get on their credit cards or loans during this ‘driving’ phase. entrance” of their life.

Young professionals and middle-aged people are generally more banking savvy and would seek to increase their already earned money through investments. This is the group that focuses on better interest rates and better returns on investments rather than borrowing directly unless absolutely necessary. The “investment” need of young and middle-aged professionals can overlap with borrowing needs when buying a home or starting a new business becomes a priority. However, these are still investments. The 30-55 year olds are mainly looking for investments and the bank helps to meet their need for investment during the crucial “construction” phase of their lives. Late middle age into old age is marked by an increased fear of loss of life and the need to save for the future. We are used to worrying about the future and mainly about old age and dependency. Since the decline of physical strength and a productive working life is very real, we want to save for old age, which begins after age 50 and continues until at least age 70. Although this realization should come to us earlier, we don’t usually seem to manifest our savings needs until we reach at least old middle age. In late middle age, banking needs are primarily driven by a need to “save” and late middle-aged clients seek to save their income and are not overly concerned with investments. It is a time when people begin to consciously distance themselves from social and professional life, although very gradually. Older men and women simply want their money to be there when they need it during this “moving out” phase of life.

Of course, during very old age, the need to borrow, invest or save gradually diminishes. The psychological phases described above are general and do not take individual differences into account. Many people develop savings or investment needs early in life and there could be social and cultural patterns in the banking and financial behavior of individuals. From a more subjective/individualistic point of view, the borrowing, saving and investment needs of any individual can be explained in an interesting way using psychoanalysis. Freud suggested that we all go through oral, anal, phallic, latency and genital phases of sexuality in our childhood and that our personality patterns are largely shaped by whether we have actually resolved conflicts during this time. or that we just became obsessed at some point. Thus, anal-retentive personalities are those who have an excessive need for control or precision, so these people are more likely to save from a young age and even to be extremely parsimony when it comes to money or behavior. banking. The Anal Expulsive Personality is one who wastes too much, so these people will be interested in excessive borrowing and can turn their credit history into a mess. Aggressive oral personalities are those who are ambitious and have extreme investment needs and while this can be a positive aspect, bankers should be aware of the more psychological aspects of individuals before loaning them out too soon. Perhaps banks should perform psychological tests on individuals before lending to understand which customers are likely to repay and which customers are not likely to meet their obligations and then perhaps we will be able to avoid banking disasters in the future.



Source by Saberi Roy

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