Retail Banking

28 April 2015

Retail banking is a key component of banking industry, offering mass-market banking services to natural persons and small businesses.

Retail banking differs from private banking in two aspects.

Retail banking provides three important functions to its clients: credit, deposits and money management. These functions actually explain how a retail bank works. Customer deposits are an extremely important source of funding for most banks: these funds are used to make loans. Banks charge higher interest rates on loans than they pay out on deposits.

Retail Banking Products

Depending on the function, retail banking products can be classified into three broad categories:

Credit-based products are offered to customers to cover their current needs, to purchase cars, homes, other goods or services, or to finance their business needs in the case of small businesses. By credit-based products retail banks provide the economy with extra liquidity. These group of products can be further broken down into several sub-groups:

Deposit-based products are mainly represented by various types of deposit accounts and provide a way for customers to deposit their money:

Transaction management products include products facilitating actual money management like making money transfers, payments, direct debits:

Distribution Channels

Retail banks use various communication channels to reach customers. Due to financial and technological innovations, retail banking distribution currently ungergoes rapid changes throughout the whole Europe.

Local branches are "brick-and-mortar" locations where banks offer face-to-face and automated services. Local branches are more often used by customers for sales and advising than for transaction processing. A point-of-sale branch is a small bank office situated in a shop to provide customers with point-of-sale loans to purchase goods.

Besides local branches, providing customers direct face-to-face channels, there are a wide range of indirect channels that can also be used. The indirect channels are often used by the customers to perform financial transactions.

Automated Teller Machine (or ATM) is a device that enables customers to perform a variety of transactions, such as get access to their cash, pay bills, get a balance or mini statement.

Telephone banking is providing banking services via dedicated call centers, automated services or by personnel in bank branches.

Internet (online banking) allows customers to conduct financial transactions on a website operated by the bank.

Mobile banking gives customers a way to perform financial transactions via a cell phone or a tablet.