In view of these complexities, four approaches have come to dominate the literature on banking output: the production approach, the intermediation approach, the operating (income-based) approach and more recently, the modern approach. Under the production approach, banks are primarily viewed as providers of services to customers.
The input set under this approach includes physical variables (e.g., labour, material, space or information systems) and the outputs represent the services provided to customers and are best measured by the number of deposit and loan accounts. Under the intermediation approach, financial institutions are viewed as intermediating funds between savers and investors.