'Retail Banking' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Retail banking is also called consumer banking. This form of banking is most easily described as the common everyday activities of financial service firms. In this definition their individual clientele utilize the local area branches of the more significant and bigger commercial banks. They provide a wide range of services to their customers through this division of financial services. These include checking and savings accounts, personal loans, mortgages for homes, lines of credit, credit cards and debit cards, and CDs certificates of deposits investment opportunities for customers. The main concentration is on the one on one consumer relationship.
Within the United States, the phrase commercial bank refers to a traditional bank. This term distinguishes it from the competing concept of investment bank. Following the Great Depression of the 1930s, the American Congress mandated that banks were only allowed to participate in traditional deposit and lending banking activities as opposed to investment activities. This Glass Steagall Act similarly required that investment banks could only participate in activities pertaining to the capital markets.
This important separation prevented another severe financial crisis like the Great Depression from erupting. Unfortunately for Americans everywhere, the Congress chose to repeal these protections afforded to markets and individuals by Glass Steagall when they canceled out the act in the 1990s. This allowed commercial banks to once again dabble in investment bank activities with depositors’ money. It was considered to be a main factor which led to the financial collapse of the Great Recession in the years 2007-2009.
Commercial banking also relates to a division of a bank, or even an entire bank, that focuses on larger businesses and corporations. They handle these huge entities’ loans and deposits. This would separate the concept from retail banking which only addresses the ordinary individuals along with their banking needs and accounts.
The idea behind retail banking is to be a one size fits all, single stop shop which provides all the financial services which they possibly can to their retail customers. Bank clients demand a full lineup of essential banking services from these retail operations. Included in this are such expected products as savings and checking accounts, lines of credit, personal loans, home loans, credit cards, debit cards, and CDs. The majority of retail banking customers visits their local bank branch in order to receive these services. Such centers deliver the consumer demanded onsite client service to provide for each of these retail customer requirements.
Financial representatives also work in these local area branches. They offer their clients of the bank both financial advice and customer service. Such financial reps prove to be the primary contact for garnering credit related applications for these products which help the banks to generate their revenues and profits.
These types of banks have begun to offer expanded retail services so that they can capture more business from their retail customers. Besides the typical bank accounts and accompanying customer service that the in branch financial reps deliver, banking centers have added various combinations of financial advisors. They provide a wide array of product offerings. Some of these are investment services like stock brokerage accounts, wealth management services, retirement planning, and even private banking for High Net Worth Individual clients and families.
There are occasionally insurance products and services offered through the in-branch retail banking network as well. Sometimes, such ancillary products and services will be provided out of third party affiliated institutions like insurance companies and investment firms. The idea behind such broadened offerings is to both provide customers greater convenience and to develop more points of financial interaction between them and the bank. This allows for clients of the bank to have greater and more convenient access to their funds and to engage in personal banking transactions both faster and easier.
The Internet has also made possible online retail banking. Many banks now offer partial banking services online. A few are actually banks which are entirely structured to provide banking services over the Internet alone. Among these are GoBank, Moven, and Simple. They offer lower fees as they have significantly smaller overheads with no in-branch personnel, buildings, and networks to support.
The top five biggest American commercial banks possessed more than half of the retail bank customer deposits for the entire country in the year 2015. These five largest institutions were JPMorgan, Bank of America/Merrill Lynch, Wells Fargo, Citibank, and U.S. Bank.