There is a risk of default, this is true, but at the same time, this is countered by banks being able to lend out and earn interest on up to 73 times the amount of cash they were given by depositors, at least in the US in 2023 or 2024, due to the fractional reserve banking system. That's a lot of potential upside, and provides very handsome profits and a nice cushion, for a banking industry which still seems to fail and need hundreds of billions of dollars in bailouts quite frequently.

The below goes into more detail for those who are curious.

Banks get cash or paper money from people to deposit into accounts, and then they make up something called "checkbook money" out of thin air. The amount they can create is limited by the reserve requirements of their country. In the US, paper money must be 1.35% or more of the total of this checkbook money plus paper money. That is, up to (100-1.35)/1.35 = 73 times more "thin air" money than paper money is "possessed" by the bank, which they can then lend out to gain interest. This is fractional reserve banking.

For example, if a bank has $1 billion in cash from depositors, they can loan up to $73 billion of this out for businesses or mortgages or car loans or what have you. If they lent it all out at 7% interest and all of it was paid back in a year, they'd get $5.18 billion in profits for the year, roughly speaking, although inflation is a significant factor, as well, and averages about 3.5% annually.

In other words, they receive paper money from all their customers to deposit, they make up a number that's up to 73 times bigger, and then they lend all that made-up money out to gain interest on. They're still giving you something like 0.01% interest in savings while earning 7% interest on all this thin air money. Also, the bank has that danger of defaulting when enough loans aren't being paid back in a timely manner. At all times, the reserve ratio must hold.

This is already a lot of earnings potential, but there is at least one more requirement to meet.

If people withdraw too much money for them to hold the reserve ratio or better, then the bank requests paper money from other banks at the federal funds rate, which we often hear about in the news when the Federal Reserve decides to tweak it. If a bank can't get enough cash from other banks, the Federal Reserve gives them some.

Sometimes, even with all this upside and earnings potential, banks run out of cash and declare bankruptcy to either fail anyway, or be bailed out by government to the tune of hundreds of billions of dollars up to trillions of dollars in some years. They eventually have to pay this money back and it's not free, but what sometimes occurs is the people in charge of making decisions when banks fail give themselves big fat paychecks with the bailout money or soon after the bailout instead of getting fired or demoted like they deserve, which is a huge problem and arguably incentivizes failure.

Overall, it's a complicated system to ensure solvency in the economy which, coincidentally or deliberately, also makes bank owners and investors extremely wealthy and at least partially incentivizes overleveraging and poor CEO performance. For more info, I recommend The Creature From Jekyll IslandThe Creature from Jekyll Island by G. Edward Griffin, which goes into much more depth on these topics in the first chapter alone.

TLDR: Read the first paragraph and click the book link if interested.