Most players in our financial ecosystem are important – except those running Ponzi schemes and scammers.

For instance, banks. They provide job opportunities, keep our funds safe, give us access to financial services and contribute to the country’s financial health.

But beyond its friendly, approachable image, there are four things about the financial ecosystem we live in that you must understand.

1. Banks use the money you deposit to make money for themselves

Did you know that for every RM1 you keep in the bank, they can loan 10 times that amount to others and charge interest on it? If someone deposited RM10,000, a bank can in turn loan out RM100,000 to others. This is called fractional-reserve banking.

That’s why banks always encourage you to deposit money with them, yet market personal loans and credit cards back to you. The more money is deposited with them, the more they earn when they lend it out to people and businesses (at double-digit interest, too – super lucrative).

Of course, they also take risks in the process. What if the people who borrowed defaulted on their loan, or can’t pay it back? So they’re selective with WHO they loan money to. This is where Debt Servicing Ratio (DSR) scores come in – a measurement that shows a person’s ability to pay back a loan.

You’ll know if you have a healthy DSR score if you experience an increase in marketing calls/emails/sms-es inviting you to take up personal loans and credit cards.

They know you are “low-risk” and therefore more likely to pay back the loan amount plus the interest.

2. The poorer you are, the more you pay relative to your income

The financial ecosystem can be ruthless sometimes. It basically promotes the culture in which the rich gets richer and the poor, poorer.

Banks reward “good” customers by offering them the best products with more perks, benefits, better prices and lower interest rates.

For example, there’s a big difference in return rates for fixed deposits of RM1,000 versus RM10,000.

Banks penalise “bad” customers by imposing fees and penalties, limiting financial options, and sometimes closing accounts altogether.

Why do you think some people are pushed to get money from Ah Longs? Because they are deemed high-risk and can’t borrow from banks.

It’s understandable why banks do this – they want to limit their risks. Why lend money to people who have a history of not paying back? At the end of the day, they are a business. Their aim is to generate profits and keep shareholders happy.

3. It’s not possible to play fair

We are part of the financial system. Like it or not, we are in this game together. Except for complete withdrawal from society (or using crypto exclusively), we are in this game.

You’d expect the rules would be the same for everyone. But some people get an extra page of instructions i.e. the legal loopholes within the financial system that only the rich have access too.

They get advice from accountants and fund managers and lawyers, and together device ways to pay as little as they can get away with, like keeping their money tax-free in other countries. Instead of, you know, paying the full share of their taxes so it can fund development of our country and contribute to welfare programmes run by our government.

Banks and the financial services industry aren’t immoral or unethical for providing this service. Rather, they’re amoral, neutral.

Everything is a game as long as it’s technically legal and brings revenue to them. It’s also just business-savvy to cater to the rich because just one of them can bring thousands and even potentially millions in revenue to them.

4. The next financial crisis is coming

Apparently the average number of years between financial crashes are 28 years or so, but sped up in this globalisation age.

What will cause it? Experts make predictions, but since none of us can prevent it, why and how doesn’t matter.

How about saving as much money as you possibly can now, then go on a spending spree during the financial crash, picking up cheap stocks and properties. That’s what the rich will be doing anyway.

This article first appeared in ringgitohringgit.com

Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.