Both commercial and retail banking is a part of one business. The customer base for the two is different. They both offer banking services to people. Commercial banks cater to the needs of corporate customers. Retail banks provide service to retail customers. It can be found almost all banks have a separate division for retail and corporate. It can be challenging to decide which division to go for. One needs to know what are the differences between the two. This article has discussed in detail what is the difference between the two. Both the differences and similarities have been discussed here.
What Is Meant By Retail Banking?
Retail banking is also called personal banking or consumer banking. They mainly provide their service to individuals. They do not cater to large businesses and industries. Mass-market banking, designed for the general public, is known as retail banking. Many services are provided for clients to manage their money. They have services like a savings account, loan and checking account. They also have services like financial advice and source for credit. Retail banks have a type called local community banking. They also include large-scale global corporate banks. As the world is modernizing, all the features banks offer are available digitally for their customers.
What Are The Services Offered By Retail Banking?
Retail banking offers many services and facilities to help customers manage their finances. But the level of service depends on some factors. The client’s income level is a factor. The client’s level of involvement with their bank is also a factor. There are many channels for distribution provided by these banks. They have many branches, online applications and websites. A few services that the banks offer are:
- Deposit account:
This account means savings, checking, and many other accounts that help to store, deposit and manage the client’s money. Depending upon the account agreement, one can withdraw the deposited money. The fund can be withdrawn using checks, cards, and over-the-top withdrawal slip.
- Individual lending (secured):
Secured individual lending is offered if an individual wants to buy a huge asset. A mortgage or loan against property on investment or residential property is an example of this loan. This, in turn, profits the retail banking service. It also helps to build a client base. Another good example of it is automobile financing.
- Individual lending (unsecured):
This loan means student loan, credit card and personal loan. It is issued to individuals to facilitate their spending. No collateral or permission is needed as it is an unsecured loan. The terms can mostly be based on the credit score of the customer. If a person is willing to apply for this loan, they must ensure their credit score is high. The interest rate would depend on the terms of credit and can be high.
- Certificates of deposit:
A CD or certificate of deposit is a savings account. There is a fixed tenure, rate of interest and date of withdrawal for this. Compared to other savings accounts, this one has a high-interest rate. The period usually ranges from 3 months up to 5 years. For a CD, there is mostly no need to make monthly payments. But for early withdrawal, some banks charge a penalty.
- Cash access:
It simply refers to how the customer can access their cash. E.g., ATM.
What Is Meant By A Commercial Bank?
The other name for this is corporate banking. They provide services to institutions, corporates, businesses and, at times government. They offer deposit products and also in addition to them they offer some commercial services and products. The model of this banking service is to maximize revenue. As compared to retail banking, commercial banking has a low client base. But they are way more profitable as their clientele is way more affluent.
What Are The Services Offered By Commercial Banks?
All the services offered by them specifically cater to the needs of the corporates.
- Merchant services:
It refers to loans and many other credit lines. It includes credit card processing, electronic check service and mobile payment solutions. This allows companies to accept and make payments. It is vital for online business.
- Global trade services:
This service refers to trade finance, including global payment, letters of credit, financing and foreign exchange. It is used to streamline international commerce and trade. A third party is introduced, which eliminates supply and payment risk.
- Treasury management service:
This service helps businesses to manage their assets like investments and cash. Fraud prevention, disbursement and fund collection are a part of this service.
- Lending services:
Commercial banks offer many programs to lend money. It includes the working capital for real estate lending, equipment financing and business. Their short-term cash flow is secured and meets their capital needs long-term.
- Employee services:
Corporations need to build a benefits plan for their employees. This service is for that purpose.
What Are The Differences Between Retail Banking And Commercial Banking?
- Retail banking caters to individuals. Commercial baking, on the other hand, caters to corporates.
- Retail banking has customer-oriented programs. Commercial banks have services that are designed for cooperates.
- The services and products offered by the retail banks are standardised. On the other hand, commercial banks customize their services and products for their clients.
Although there are many differences, we can still find some similarities between retail and commercial banking. Both banks offer debit and credit cards. They both have the facility of loans. Online services are provided by the two. So, in this article, it has been discussed in detail what are the difference we find between the two. One such thing is to do good research before opting for any service; if looking for financing options, then “Piramal Finance” is a good personal loan/financing option for buyers.