Retail Banking System

What is retail bank?

• Retail banking is when a bank executes transactions directly with consumers, rather than corporations or other banks.

• A retail bank is a bank that works with consumers, otherwise known as 'retail customers'.

Introduction

• One-stop shop Financial Services • On behalf of Retail Clients• Create Strong linkages

Cont.

Retail banks provide basic banking services to the general public, including:

• Checking and savings accounts• CDs• Safe deposit boxes• Mortgages and second mortgages• Auto loans

Retail banking characteristics

Today’s retail banking sector is characterized by three basic characteristics:

• Multiple products(deposits, credit cards, insurance,

investments and securities)

• Multiple channels of distribution(call center, branch, internet)

• Multiple customer groups (consumer, small business, and corporate).

Retail Banking Vs. Corporate BankingRetail banking

• Bank that deals directly with retail customers. • Also known as consumer banking or personal banking,• Retail banking is the visible banking to the general public• Bank branches located in abundance in most major cities.

Corporate banking• Known as business banking, refers to the aspect of banking that

deals with corporate customers.• The term was originally used in the U.S. to distinguish it

from investment banking• Corporate banking is a key profit center for most banks.

Retail Banking Vs Investment Banking

• Typically assist corporations and governments in raising capital by underwriting and acting as the agent in the issuance of securities.

• Assist companies involved in mergers and acquisitions, derivatives etc.

• Provide ancillary services such as market making and the trading of derivatives, fixed income instruments, foreign exchange, commodities and equity securities.

• Investment banks’ dealings are with other companies’ and governments’ banks, retail banks deal directly with customers. Investment banks specialize in complex deals. No customer has a current account or cheque book. Retail banking customers, on the other hand, have current accounts, cheque books and account (debit) cards.

Retail Banking VS Commercial Banking

• Retail bank does transactions directly with consumers. Commercial banking is primarily concerned with receiving deposits and lending to businesses, whereas retail banking provides the same products (such as deposits or loans) just to individuals.

• The commercial bank business model is typically based on relationship management and sector specialization.

Products and Services of Retail Banking

Products Services

Checking and savings accounts

Certificates of Deposit Guaranteed Investment

Certificates Mortgages Automobile Credit cards Lines of credit

Stock brokerage (discount and full-service)

Insurance Wealth management Private banking

The Business of Retail Banking• Act as payment agents• Conducting current accounts for customers,• Paying cheques • Collecting cheques • Enable customer payments via EFTPOS

(electronic fund transfer at point of sale), and ATM (automated teller machine).

Advantage to Customers

• Anywhere anytime banking.• Improved product offering.• Faster and accurate service.• Customer specific products.• Branch customer to bank customer.• Relationship banking.

Advantage to Banks

• Retail deposit are stable and constitute the core deposit

• They are interest-insensitive and less bargaining

• They constitute the low cost fund• Retail customers bring other business to the

banks

Advantages(cont.)

• Better yield-better bottom line.• Deployment of fund-easy and safe.• Helps the economy in productive activity.• Boost innovative credit.• Diversified portfolio.• Avenues for non-fund business.

Conclusion