What is Retail Banking?
Retail banking is a banking facility that offers financial services to the general population rather than companies. It certainly helps retail customers conduct their daily financial dealings more effectively and safely. Also labeled as “consumer banking,” it occurs between consumers and their banks.
Retail banking services are provided both on online portals and offline branches. Moreover, it incorporates savings and checking accountChecking AccountA checking account is a bank account that allows multiple deposits and withdrawals. Additionally, it provides superior liquidity., credit cards, consumer loansConsumer LoansA consumer loan is a type of credit given to a consumer to finance specified set of expenditures. The borrower must pledge a specific asset as collateral for the loan, or it may be unsecured depending on the loan's monetary value., debit cards, internet banking services, and mortgages. Simply put, it is a consumer-oriented banking approach.
Table of contents
- What is Retail Banking?
- Retail Banking Explained
- Types Of Retail Banks
- Retail Banking Products
- Retail Banking vs Commercial Banking
- Frequently Asked Questions (FAQs)
- Recommended Articles
- Retail banking is a banking service that directly handles individual consumers, not enterprises. Moreover, retail banking jobs entail the provision of customer-centered solutions.
- There are 3 types of retail banks – small, large, and online. Moreover, they collect funds through service charges, overdraft charges, monthly maintenance fees, and modest fees.
- Its products comprise checking and savings accounts, credit and debit cards, personal and home loans, and also, certificates of deposit.
- Consumer banking (catering to individual consumers) differs from commercial bankingCommercial BankingA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits. (catering businesses) regarding the target audience, products, and transactional volume and value.
Retail Banking Explained
Retail banking assists consumers in directly connecting with the bank to manage their everyday requirements, for example, personal loans and mortgages. Moreover, they must approach the bank portal or branch to examine its menu of retail banking services. It helps customers certainly get the desired services at the concerned portal or branch. In recent years, the growth of retail banking jobs has certainly attained a high level owing to the demand for digital banking services.
Also termed “personal banking,” it facilitates management of the moneyManagement Of The MoneyMoney management refers to the proper use of money, which includes creating a budget, understanding cash expenses and incomes, tracking the money spent, saving some income for investment and future use, eliminating unnecessary expenses, and keeping track of all items to understand cash spending and generation. for individual consumers. Thus, the profile for retail banking jobs includes offering personal banking services and accounts, for example, product manager or customer advisor.
Retail banks also impose monthly maintenance costs and service charges to improve their bottom line. Additionally, they charge overdraftOverdraftOverdraft is a banking facility that offers short-term credit to the account holders by allowing them to withdraw money from their savings or current account even if their account balance is or below zero. Its authorized limit differs from customer to customer. fees when consumers spend beyond available funds and levy modest fees to send wire transfers or print cashier’s checks.
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Types Of Retail Banks
So, there are 3 kinds of retail banks:
#1 – Small Banks
They function in a small range via branch bankingBranch BankingBranch Banking refers to a bank's banking services through a wide network of branch offices. For example, if a bank has ten branches in a city, account-holders can choose a nearby branch to make deposits, withdrawals, and other services. with nearly all facilities offered by the large banks and hence are quite known among the populace. Nevertheless, they possess lower market shares and lesser deposits compared to them.
#2 – Large Banks
These prominent banks operate in big cities with numerous branches and certainly have more personnel than small banks. Also, several retail clients choose them because of their huge popularity.
#3 – Online Banks
As the name suggests, online banks work electronically with no tangible offices. Moreover, they operate through an official website accessible from even the remotest parts of the world. Now that a majority of people prefer to avail banking services from the comfort of their homes, it is a lucrative option for people with hectic schedules.
Retail Banking Products
Moreover, let’s go through the list of personal banking products:
#1 – Savings Accounts
Also known as “interest-bearing accounts“, it is a relevant retail banking example referring to basic deposit accounts to safeguard cash with a decent interest rate. They stash away the amount for short-term requirements and generally apply cash transferral and withdrawal limits.
#2 – Checking Accounts
These deposit accounts permit easily accessible (and usually unlimited) cash withdrawals and deposits for regular payments. Also known as “Transactional accounts,” they offer debit cards for purchases and online bill payments. Nonetheless, they render less interest than savings accounts.
#3 – Debit Cards
Also called ATM Cards, they are bank-issued payment cards for cashless transactions through money deduction directly from the checking accountChecking AccountA checking account is a bank account that allows multiple deposits and withdrawals. Additionally, it provides superior liquidity.. Furthermore, they link straight to the bank account, and consumers can utilize them at Automated Teller Machines (ATMs).
#4 – Certificates Of Deposit (CDs)
This savings account holds a set capital amount for a predetermined duration and the issuing bank grants interest in exchange. When cashed in, consumers collect the actual amount and the interest amount.
#5 – Credit Cards
#6 – Home Loans
They denote a capital amount consumers lent from banks or financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. to buy a home. Moreover, second mortgages infer the usage of home equity as collateral to borrow funds.
#7 – Personal Loans
These loans certainly entail money borrowed from banks, online lenders, or credit unions to meet financial obligations. Moreover, the multi-purpose unsecured loanUnsecured LoanAn unsecured loan is a loan extended without the need for any collateral. It is supported by a borrower’s strong creditworthiness and economic stability is compensated in monthly payments within a few months or years.
Now that we know the concept, let’s discuss some relevant retail banking examples:
Suppose Elena visits the nearby retail bank to deposit $5000 in her checking account. Moreover, one of the salespersons in the bank also briefs her about the latest investment scheme for retirement. Now, Elena is certainly impressed and decides to invest in the retirement plan next month.
She also enquires about the home loan services to buy a new house in another locality. Hence, personal banking helped her facilitate the cash deposit process, comprehend the new scheme, and acquire personal counseling.
Due to consistent innovations, consumer banking has been expedited since the onset of the COVID-19 pandemic. In other words, it is experiencing a top-to-bottom evolution to benefit clients with an ever-lasting revolution. Coronavirus has undoubtedly been a blessing in disguise for consumer banking as it has forced financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces. toward adopting smooth banking experiences.
However, there is still a lot of friction to overcome from. For instance, 40% of banks offering online checking account services require applicants to finish a process more than 10-minutes long. Needlessly, real innovation is required for personal banking to originate from a digital bank establishment.
Retail Banking vs Commercial Banking
|Particulars||Retail Banking||Commercial Banking|
Provides financial offerings to the general population.
Provides financial offerings to firms.
|Personal banking services and accounts||Serving enterprises|
|Products and services||Savings and checking accounts|
Personal and home loans
Debit and credit cards
Certificates of Deposit (CDs)
Global trade services
Treasury management services
Transaction volume & value
|Standardized products and services||Customized products and services|
|Increased earnings of small individuals and units|
Decreased operational charges
Strong customer-bank relations
Secured method to retain savings
|Safeguarding public riches|
Simplification of business transactions and deposits
Conversion of digital money
Global trade expedition
Retail banking meaning certainly implies providing banking solutions to only individual clients and not enterprises. Therefore, it revolves around the customer to offer them secure financial services. Furthermore, this includes CDs, credit cards, and personal and home loans. Moreover, the most common retail banking example is debit cards.
Yes, retail banking is deemed a good career in the 21st century. The onset of the Coronavirus pandemic has certainly accelerated the demand for digital-yet-personal banking services. It has also revolutionized the banking landscape. Therefore, several professionals choose retail banking jobs to provide customized monetary solutions.
The retail banking products include checking accounts, credit cards, savings accounts, mortgages, debit cards, home equity loans, CDs, and personal loans. Moreover, consumer banking products are basic and standardized financial offerings to the general population. They also have high volume, fair value, and decreased market riskMarket RiskMarket risk is the risk that an investor faces due to the decrease in the market value of a financial product that affects the whole market and is not limited to a particular economic commodity. It is often called systematic risk..
This has been a guide to retail banking and its meaning. Here we explain retail banking products, examples, & how it differs from commercial banking. You may also have a look at the following articles to learn more –