The Difference Between Retail Banking vs. Corporate Banking (2024)

Retail Banking vs. Corporate Banking: An Overview

Retail bankingis a bank's services that deal directly with consumers, while corporate banking is the part of the banking industry that serves business or corporate customers.

Retail banking is the face of banking to the general public via the many bank branches located in most cities, mobile apps, and banking websites. Corporate banking, on the other hand, works directly with businesses of various sizes to provide them loans, credit, savings accounts, andchecking accounts that are specifically designed for companies rather than for individuals.

Key Takeaways

  • Retail bankingis the division of a bank that deals directly with individual, non-business customers.
  • Retail banks bring in customer deposits that largely enable banks to make loans to their retail and business customers.
  • Corporate banking refers to the aspect of banking that deals with corporate and other business customers.
  • Commercial banks make loans that enable businesses to grow and hire people, contributing to the expansion of the economy.
  • Both types of banks offer various products and services.

Retail Banking

Retail banking provides financial services to the general public. Also referred to as consumer or personal banking, this side of the industry allows consumers to manage their money by giving them access to basic banking services, credit, and financial advice.

Retail banking encompasses a wide variety of products and services, including:

  • Checking and savings accounts
  • Certificates of deposit(CDs)
  • Mortgages
  • Automobile financing
  • Credit cards
  • Lines of creditsuch as home equity lines of credit (HELOCs) and other personal credit products
  • Foreign currency and remittance services

Retail banking clients may also be offered the following services, generally through another division or affiliate of the bank:

  • Stockbrokerage (discount and full-service)
  • Insurance
  • Wealth management
  • Private banking

The level of personalized retail banking services offered to a client depends on their income level and the extent of their relationship with the bank. While a teller or customer service representative would generally serve a client of modest means, an account manager or private banker would handle the banking requirements of a high-net-worth individual (HNWI) who has a wide-ranging relationship with the bank.

Retail banks still have brick-and-mortar branches, but retail banking is perhaps an area of banking that has been most affected by technology, thanks to the proliferation of automated teller machines (ATMs) and the popularity of online and telephone banking.

The Difference Between Retail Banking vs. Corporate Banking (1)

Corporate Banking

Corporate banking, also known as business banking, typically serves a diverse clientele, ranging from small- to midsized local businesses with a few million dollars in revenue to large conglomerates with billions in sales and offices across the country. The term was originally used in the U.S. to distinguish this line of business frominvestment banking after theGlass-SteagallAct of 1933separated the two activities.

After thatlaw was repealed in thelate 1990s, corporate banking and investment banking services have been offered for many years under the same umbrella by most banks in the U.S.and elsewhere. Corporate banking is a key profit center for most banks. But as the largest category of customer loans, it also is the source of regular writedowns for loans that have soured.

Commercial banks offer more than just deposit and withdrawal of business funds. The following products and services, among others, to corporations and other financial institutions:

  • Loans and other credit products
  • Treasury and cash management services
  • Equipment lending
  • Commercial real estate
  • Trade finance
  • Employer services

Some banks will allow businesses to have a warm card to allow employees to deposit into the business accounts. Through their investment banking arms, commercial banks also offer related services to their corporate clients, such as asset management and securities underwriters.

Special Considerations

The financial sector is one of the most important parts of the economy—both domestic and global. In the first place, consumers—both personal and commercial—deposit their money into savings accounts, which banks use to lend to others. Banks also help create credit, facilitate trade, and help in the formation of capital.

The financial sector, which includes both the retail and commercial banking industries, is one of the most important facets of any economy.

When banks have problems, the economy can suffer. Take the 2007-2008 financial crisis as an example. The crisis had its roots in the U.S.housing bubbleand the excessive exposure of banks and financial institutions around the world to derivatives and securities based on U.S. home prices. Banks grew increasingly reluctant to lend money, either to their counterparts or to companies.

This resulted in a near-total freeze in the global banking and lending mechanism, causing the most severerecessionworldwide since theGreat Depression. This near-death experience for the global economy led to a renewed regulatory focus on the largest banks that are deemed “too big to fail” because of their importance to the worldwide financial system.

What Are Some Benefits of Corporate Banking?

Having a corporate account improves a business' credibility. Maintaining separate bank accounts for personal and business uses can make the business appear more professional. Having this type of account also opens the business to greater investment opportunities, may offer liability protection, can improve financial management, and make financial transactions easier.

What Are the Main Types of Retail Banks?

In general, commercial banks, credit unions, and some investment banks offer retail banking services for individual and family consumers.

How Does a Corporate Bank Make Money?

All banks usually make moneyfrom what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make. They also earn interest on the securities they hold. They also earn fees for customer services they provide, such as checking accounts, financial counseling, loan servicing, selling other financial products (such as insurance and mutual funds).

The Bottom Line

Retail bankingis the part of a bank that deals directly with individual, non-business customers. This operation brings in customer deposits that largely enable banks to make loans to their retail and business customers. Corporate, or business, banking deals with corporate and other business customers of varying sizes. Among a range of services, this type of bank lends to enable businesses to grow and hire people, contributing to the expansion of the economy.

The Difference Between Retail Banking vs. Corporate Banking (2024)

FAQs

The Difference Between Retail Banking vs. Corporate Banking? ›

Retail banking is the part of a bank that deals directly with individual, non-business customers. This operation brings in customer deposits that largely enable banks to make loans to their retail and business customers. Corporate, or business, banking deals with corporate and other business customers of varying sizes.

What is the difference between retail banking and corporate banking? ›

Retail banks cater to individual customers, providing basic financial services and prioritising personalised customer service. On the other hand, corporate banks focus on businesses, institutions, and government entities, delivering specialised financial solutions to meet their complex needs.

How do you know your bank is corporate or retail? ›

They need to store money, avail loans and manage finances just like individuals. Regular retail banks provide financial services to individuals but are not equipped to service businesses. Corporate banking provides businesses financial services like account holding, loans, capital, vendor management, and more.

What is a major difference between a retail bank and a commercial bank? ›

Commercial banking is another name for corporate banking, which offers banking services to businesses, governments, and other institutions. While retail banking offers its services to people for personal use, commercial banking serves institutions.

What is the difference between retail banking and core banking? ›

Retail banking focuses on non-commercial transactions and consumer loans while core banking focuses primarily on businesses and commercial loans.

What is the difference between retail and corporate? ›

Retail banking and corporate banking are two different types of banking services that cater to different types of customers. Retail banking services are geared towards individual customers, while corporate banking services cater to corporate clients.

Can I switch from retail banking to corporate banking? ›

Your decision to take up a banking course after graduation will stand you in good stead after being in retail banking. Corporate banking is a great career choice. Corporate Banking which is an area many career aspirants would love to join surprisingly has very few good certification courses.

What is an example of a retail bank? ›

Retail Banking Definition

For example, Bank of America has consumer (retail), investment, and commercial banking operations. Its consumer or retail banking functions include offering mortgages, personal loans, and credit cards to individuals, as well as worldwide ATMs.

What are the advantages of retail banking? ›

Advantages of Retail Banking

Benefit from guaranteed returns on deposits, particularly with Fixed Deposits (FDs). Utilise innovative banking products with ease of access via online banking. You can select from many banks and Non-Banking Financial Companies (NBFCs).

What is retail banking also known as? ›

Retail banking, also known as consumer banking or personal banking, is the provision of services by a bank to the general public, rather than to companies, corporations or other banks, which are often described as wholesale banking (corporate banking).

Is Wells Fargo a retail bank? ›

Wells Fargo & Co (WFC) is a diversified financial service holding company that offers retail and wholesale banking, and wealth management services to individuals, businesses, high-net-worth individuals, and institutions, through its subsidiaries.

What do you mean by corporate banking? ›

The corporate banking division makes loans to corporations, while the commercial bank division makes loans to people and small businesses. The difference is that the loans that a corporate bank puts together are on a much larger scale.

Which of the following is not included in retail banking? ›

Operating account is NOT retail banking product.

What are the 4 retail banks? ›

The “big four banks” in the United States are JPMorgan Chase, Bank of America, Wells Fargo, and Citibank. These banks are not only the largest in the United States, but also rank among the top banks worldwide by market capitalization, with JPMorgan Chase being the most valuable bank in the world.

What are advantages and disadvantages of retail banking as compared to corporate banking? ›

Retail banking, or consumer banking, provides services to individual customers and is essential to the financial system. The advantages include personalized service and access to advice from professionals to navigate finances more effectively. However, retail banking has some drawbacks, such as higher fees.

What do you mean by retail banking? ›

Introduction to Retail Banking

The banking that takes place between your personal bank and you is nothing but retail banking. All the banking services that you enjoy from your bank including your personal accounts, saving accounts, loans and even online banking services fall under retail banking.

What does corporate banking do? ›

Corporate banking teams often work with institutional clients on customized credit solutions, such as operating or revolving lines of credit, derivative hedging products, bridge or acquisition financing, real estate financing, leveraged finance or leases.

What is the difference between corporate banking and commercial banking? ›

The corporate banking division makes loans to corporations, while the commercial bank division makes loans to people and small businesses. The difference is that the loans that a corporate bank puts together are on a much larger scale.

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