DIFFERENCE BETWEEN COMMERCIAL BANKS AND INVESTMENT BANKS

 

Banking is primarily classified into two broad categories, differentiated by their functions, clients, and main objectives:

In practice, many of today's large financial conglomerates operate with separate commercial and investment banking divisions, even though in some countries the law (such as the Glass-Steagall Act in the US, repealed in 1999) no longer strictly mandates complete separation.

There is a significant lag in financial education and inclusion in Latin America. This is not an intentional or deliberate deprivation, but rather a multifactorial structural problem that generates a lack of knowledge about financial products and, particularly, about investment processes.

Financial education is rarely included in a mandatory and effective way in the primary or secondary school curriculum. Essential concepts (inflation, interest rates, risk-return relationship) are not understood by a large part of the population.

Three-quarters of the population living in poverty and extreme poverty continue to lack access to financial services, a situation linked to the cost and reach (both physical and digital) of these services. Without the use of these services, financial literacy is lost.

Historical distrust in the financial system (often justified by past economic crises) and the persistence of the informal economy mean that a large portion of the population does not participate in the formal system.

The dominant banking system has historically focused on commercial banking (deposits and loans) and has not prioritized promoting investment products or providing complex advice to the general public, but rather to high-net-worth clients.

This lack of financial literacy hinders informed decision-making, perpetuates economic vulnerability, and squanders the potential of financial inclusion as a tool for reducing poverty and inequality.

Promoting financial literacy is essential for improving living conditions, as it empowers people to better manage their money and use financial instruments to build wealth. Recommended actions include making financial education a cross-curricular or mandatory subject from primary to secondary school, focusing on practical concepts such as budgeting, saving, smart debt management, and basic investment concepts. Implement programs to ensure teachers acquire and effectively transmit this knowledge.

Leverage technology to create online learning platforms (courses, webinars, interactive games) accessible from mobile devices.

Banks and financial institutions should develop savings and investment products with clear and simple regulations (e.g., low-cost, low-risk investment funds) designed for less experienced clients, and promote a 100% digital onboarding process.

Require institutions to use simple and transparent language in their product documentation and promotion, eliminating complex financial jargon.

Develop financial education workshops and programs that address the specific needs of different population groups (youth, women entrepreneurs, remittance recipients, rural populations). Encourage the development of savings and credit cooperatives or associative models that strengthen social cohesion and education in contexts of trust. Improving financial literacy is directly related to increased income levels and economic well-being, by enabling families and individuals to make decisions that allow them to increase their wealth.