Banking has so many variations they justify it belongs to an entire sector on its own. In this article, we look at one aspect of the banking sector – retail banking.
What is Retail Banking?
Retail banking is a form of banking, also known as consumer banking. It deals with providing banking services and functions to the public. It is when a bank deals in providing financial and banking services to the everyday person.
They render these services to individuals, as opposed to the provision of banking services to organizations, businesses, companies and even other banks, which is referred to as wholesale banking.
The term retail banking is the sense that banks offer services in individual sizes, or better still, smaller sizes, just as it is the case in regular sales.
What Types of Services Does Retail Banking Provide?
Retail Banking, as mentioned earlier, offers services to individuals. These services include banking services such as
- providing savings accounts
- provision of accounts to conduct transactions
- giving credit facilities like personal loans, Home equity loans
- Provision of transaction cards such as debit cards, credit cards, ATM cards
- Provision of current accounts
- Traveller’s cheques
- Issuance of Certificates of deposit/Term deposits
Types of Retail Banks
These types of banks provide retail banking services to individuals. They include:
- Community development banks: regulated and tasked with the provision of banking services and credit facilities to areas and public groups that have been undeserved.
- Private banks: They handle the management of individuals with high net worths and their assets.
- Offshore banks: these are banks operating in locales with low tax rates and even lower regulations. We can regard most offshore banks as private banks.
- Savings banks: these banks by design accept deposits for savings. They help individuals manage their savings portfolios.
- Postal savings banks: they associate these banks with national postal systems. They are virtually savings banks with ties into the postal systems of a country.
- Commercial Banks: every other type of bank’s functions can fit into the features of a commercial bank. See the major functions of commercial banks in Nigeria.
- Credit Unions: credit unions are less formal banks in which the shareholders are those who deposit finances into it periodically.
How does Retail Banking work?
It involves a financial institution focusing all its efforts into providing services for individuals and not organizations or corporations. The operations are usually on a small scale because of the scope, but retail banking is responsible for money circulation in the economy.
What is the role of retail banking in the economy?
Their primary role in Nigeria is the constant supply of money into circulation. They require the bank to keep a certain percentage of their funds as reserves and push the rest of the money out as loans or payments. As a result, these funds move from one bank/individual to another
Retail Banking is an essential factor, not just in the banking industry but in any economy. We can describe it as banking for the grassroots, or even as direct banking because it deals with people directly.