Traditional banking is a system where you give someone else your money to look after for you then you collect it back later.
Banks have been around since ancient times, but the modern traditional centralized banking system began with the Swedish Riksbank, established in 1668.
Here’s how the system basically works.
A person gives the bank his or her money to save.
Sometimes that person might need more cash than he or she has in their account.
This means that the bank will loan the person a certain amount of money. In return, the borrower agrees to repay the loan with interest.
If the borrower doesn’t pay back all of the money, then the lender can take legal action against the borrower.
This sum of money that is borrowed can be small sums of money or very large sums, depending on the person’s needs.