Retail banking, also well-known as Consumer banking, refers to the offering of banking services to retail customers instead of institutional customers, such as corporations, companies and/or financial institutions.
Usually, retail banking involves offering the following services –
- Transactional Accounts – current account: This account is not planned to either save money or earn interest. Its only reason is the transactional convenience, as funds can be deposited or withdrawn several numbers of times.
- Savings Account – This account involves depositing funds with the retail financial institution, and earning the return on the money. On the other hand, this money cannot be withdrawn freely, and cannot be accessed by issuing a cheque.
- Debit, Credit and ATM cards
- Traveler’s cheque – With debit/credit / ATM cards gaining attractiveness, traveler’s cheques are no longer in regular usage.
- Mortgages – This involves raising funds to buy property, wherein the lender has a lien on the property so purchased. In other terms, in case the borrower fails to honor the commitment of repaying the loan, the lending institution can legally repossess the property.
- Home Equity Loan – This implies raising funds to finance an activity (like education, medical bills) wherein the home is used as security.
- Personal Loans – These loans are usually meant for a major expense, for instance, financing a wedding or overseas travel, and the interest on such loans is usually somewhat high. For the borrower, a personal loan is kind of spending loan, unlike, say, and an auto loan which can be treated as a form of investment.
- Certificates of Deposit – Certificates Of Deposit is similar to time deposit, in the sense that the funds so held are insured. Certificates Of Deposit is usually meant to be held till maturity, for a designated era of time, and at fixed interest fee.
Retail banking incorporates the services extended to consumers by commercial banks. The term retail refers to the storefront-shopping nature of commercial banking services. Nearly all commercial banks have comprehensive retail banking services and products to approach a broad consumer base.