Retail banking

Retail banking is a specific branch of the financial world. It provides essential services to the general public. People often call this consumer banking or personal banking. This type of banking focuses on individual customers rather than large entities. It is different from wholesale banking. Wholesale banking serves companies, corporations, or other banks. Retail banking might also refer to a specific department within a larger bank.

The mechanism of retail banking involves managing various financial tools for people. Banks provide transactional accounts to help customers move money. These are often called checking accounts in American English. In British English, these are called current accounts. Customers also use savings accounts to hold money for the future. Banks offer debit cards and credit cards for daily spending. They also provide traveler's cheques for people on trips. These tools allow individuals to manage their personal finances easily.

Retail banks offer many different types of loans and specialized products. A mortgage is a common product used to buy homes. Banks also offer home equity loans and personal loans. Some customers use certificates of deposit, also known as term deposits. In the United States, banks offer even more specialized options. These include money market accounts and sweep accounts. People also use Individual Retirement Accounts, or IRAs, to save for the future. These products help people meet specific financial goals.

History shows how the rules for these banks have changed over time. In the United States, the term commercial bank is often used. This term helps distinguish normal banks from investment banks. After the Great Depression, a law called the Glass-Steagall Act was passed. This law restricted normal banks to standard banking activities. It kept investment banks focused on capital market activities. This separation was intended to organize the financial system. However, that distinction was eventually repealed in the 1990s.

There are several distinct sub-types of retail banks in the world today. Community development banks are regulated institutions. They provide financial services and credit to underserved populations or markets. Private banks serve a different purpose. They manage the assets of high-net-worth individuals. Some banks are located in specific jurisdictions. These are known as offshore banks. Offshore banks are often located in places with low taxation and low regulation. Many of these function as private banks.

Other specialized banking models exist to serve specific communities. Savings banks are institutions that accept savings deposits from customers. Some of these are quite unique. Postal savings banks are savings banks that are part of national postal systems. These banks provide a way for people to save money through their local mail services.

Understanding retail banking helps us see how the economy functions for individuals. It is a major part of the service retailing sector. While commercial banking can sometimes refer to serving large corporations, retail banking stays focused on the public. It remains a vital system for personal wealth and daily transactions. This sector connects individual people to the broader financial systems of the world.