Retail banking has mass-market appeal. It is also known as consumer banking. Under this model, the local branches of large commercial banks set up special units to meet the needs of their individual clients. Retail banking units are designed to be the one-stop shop for as many financial services as possible.
Functions of Retail Banking
The three main functions of retail banking are:
- To lend money: Retail banking units offer mortgages and other types of loans to their clients
- To accept deposits: A retail banking unit is a secure place for those who want to deposit their savings
- To manage funds: Retail banking offers clients different types of accounts and cards. These instruments put them in control of their spending
Features of Retail Banking
Retail banking is devoted to financial service products. These products include checking and savings accounts, money market instruments, and home and business loans. This type of banking focuses on the needs of consumers. Individual account holders get more attention than commercial clients. Retail banking also uses the inside and outside of branches to promote and cross-sell services.
Objectives of Retail Banking
Retail banking adapts services to meet consumer needs. For example, most banks are parties to the Zelle cash app. This app enables consumers to transfer funds to their peers in a few clicks. It is a quick, convenient way to make payments, and is very popular among retail banking customers.
Retail banking also tries to satisfy all the banking needs of customers. Banks make every effort to retain customers by offering them the same products and services as their competitors.
Advantages of Retail Banking
The main advantage of retail banking is that it increases a bank’s business. It also helps to improve brand recognition. Another advantage is that retail consumers do not threaten the solvency of a bank. Retail loans seldom place a strain on the bank’s balance sheets. The third advantage is that retail customers tend to have more brand loyalty. Once the bank provides excellent customer service and their funds are safe, they will not switch. Instead, they will continue to be loyal clients for years.
What are the Types of Retail Banking?
There are two main types of retail banking. The first can be found within commercial banks. These banks profit from interest rate spreads and transaction fees. The spread is the difference between what the bank charges for loans and how much it pays on deposits. The other type of retail banking is credit unions. This type of institution offers the same services as commercial banks, but on a smaller scale.
What is the Difference Between Retail Banking and Commercial Banking?
People often use the terms “retail” and “commercial” banking interchangeably. Retail banking refers to a division within a commercial bank that handles individual customers. But commercial banks don’t cater only to individuals. They also provide services to a wide range of businesses of varying sizes.
What is the Difference Between Retail Banking and Investment Banking?
An investment bank makes money by selling securities to companies and the government. These banks also offer advisory services to large businesses. Corporations consult with them about buyouts and mergers. Morgan Stanley is one of the biggest investment banks in the United States. Another major investment bank is Goldman Sachs. Retail banking, in contrast, offers more mundane financial services to individuals.
Why is Retail Banking Market Research Important?
There’s a real need for market research in the retail banking sector. Market research helps banks to spot business opportunities. For example, they can partner with other banks. They can also create new products or improve the ones they already have. If they need to expand, market research helps them find new locations. It enables them to lower business risks. It also gives them the opportunity to create promotional materials to sell their products and services.