|Part of a series on financial services|
Retail banking is the direct execution of transactions between a bank and its consumers, rather than with corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards. The term is generally used to distinguish these banking services from investment banking, commercial banking or wholesale banking. It may also be used to refer to a division of a bank dealing with retail customers and can also be termed as Personal Banking services.
In the US the term Commercial bank is used for a normal bank to distinguish it from an investment bank. After the great depression, through the Glass–Steagall Act, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation was repealed in the 1990s. Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking).
Challenges to Retail banking If all challenges shown below are faced by the banks with utmost care and deliberation, the retail banking is expected to play a very important role in coming years, as in case of other sector. Ø The issue of money laundering is very important in retail banking. This compels all the banks to consider seriously all the documents which they accept while approving the loans.
Ø The issue of outsourcing has become very important in recent past because various core activities such as hardware and software maintenance, entire ATM set up and operation (including cash, refilling) etc., are being outsourced by Indian banks.
Ø Banks are expected to take utmost care to retain the ongoing trust of the public.
Ø Customer service should be at the end all in retail banking. Someone has rightly said, “It takes months to find a good customer but only seconds to lose one.” Thus, strategy of Knowing Your Customer (KYC) is important. So the banks are required to adopt innovative strategies to meet customer’s needs and requirements in terms of services/products etc.
Ø The dependency on technology has brought IT departments’ additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks. It is equally important that banks should maintain security to the advance level to keep the faith of the customer.
Ø The efficiency of operations would provide the competitive edge for the success in retail banking in coming years.
Ø The customer retention is of paramount important for the profitability if retail banking business, so banks need to retain their customer in order to increase the market share.
Ø One of the crucial impediments for the growth of this sector is the acute shortage of manpower talent of this specific nature, a modern banking professional, for a modern banking sector.
Typical products offered by a retail bank include:
- Transactional accounts
- Savings accounts
- Debit cards
- ATM cards
- Credit cards
- Traveler's cheques
- Home equity loans
- Personal loans
- Certificates of deposit/Term deposits
In some countries, such as the US, they may also offer more specialised accounts such as:
Sub-types of retail banks
- Community development bank are regulated banks that provide financial services and credit to underserved markets or populations.
- Private Banks manage the assets of high-net-worth individuals.
- Offshore banks are banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
- Savings banks accept savings deposits.
- Postal savings banks are savings banks associated with national postal systems.
- Tiwari, Rajnish and Buse, Stephan (2006): The German Banking Sector: Competition, Consolidation and Contentment, Hamburg University of Technology (TU Hamburg-Harburg)
- Brunner, A., Decressin, J. / Hardy, D. / Kudela, B. (2004): Germanys Three-Pillar Banking System – Cross-Country Perspectives in Europe, Occasional Paper, International Monetary Fund, Washington DC 2004.
- Retail Banker International – news, data, analysis and business information for the retail banking industry: Retailbankerinternational.com