Retail banking, also known as consumer banking, refers to the services banks provide to individual customers. Common retail banking services include checking and savings accounts, mortgages, credit cards, and auto loans. Retail banks focus on individuals, while investment banks focus on corporations and governments, and commercial banks focus on small and mid-sized businesses.
What is retail banking?
Retail banking, also known as "consumer banking," is what most American consumers think of when they hear the word "bank." Essentially, retail banking is the services banks provide to individual customers, such as checking and savings accounts.
Retail banking services are generally offered by financial institutions at local branches, where customers can withdraw and deposit money and speak directly with a banker about loan products or other needs. In addition, retail banking services are provided at ATMs, as well as through mobile and online banking platforms, which have soared in popularity in recent years.
Products offered by retail banks
The exact mix of products offered by retail banks can vary, but may include:
- Checking accounts -- many retail banks have several types of checking accounts, ranging from basic checking to interest-bearing checking accounts designed for customers with high balances
- Savings accounts -- like checking accounts, savings accounts come in several varieties
- Debit/ATM cards
- Credit cards
- Money orders/certified checks
- Wire transfers
- Mortgages (purchase and refinancing) and home equity loans
- Auto loans
- Personal loans
- Certificate of deposit (CD) and money market accounts
- Safe deposit boxes
- Banking products designed specifically for college students
In addition to these, many retail banks offer services such as retirement accounts like IRAs, brokerage accounts, college savings plans, insurance products, and more. For example, Bank of America offers brokerage and retirement services to its retail banking customers through its Merrill Lynch subsidiary.
Banks may offer other services to their customers in addition to those mentioned here. As an example, many retail banks offer notary services to their customers at no charge.
Other types of banking
In addition to retail banking, the other major types of banking include:
- Investment banking: Investment banks provide services to corporations, governments, and individuals. These services include raising financial capital by underwriting debt or equity issuances, and assisting in mergers and acquisitions.
- Commercial banking: Commercial banking refers to financial services provided to the corporate or institutional world. Many of the products offered by commercial banks are similar to those offered by retail banks, such as savings and checking accounts, but commercial banks may also offer things like foreign trade services, treasury management services, merchant services like credit card processing and gift cards, and more.
- Private banking: Similar to retail banking, private banking refers to banking and financial services provided to high-net-worth individuals. Private bankers provide financial and wealth management services on a much more personal level than traditional retail banks, which is why it can be considered a separate type of banking.
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