While corporate banking is the branch of the banking sector serving business or corporate customers, retail banking is the services of a bank directly directed at consumers.
Through the numerous bank branches spread throughout most cities, smartphone applications, and banking websites, retail banking—that face of banking to the general public—is what we know. Conversely, corporate banking directly deals with organizations of different sizes to provide loans, credit, business checking accounts, and business savings accounts especially created for firms rather than for people.
Retail Banking
Retail banking offers the average people financial services. Often referred to as consumer or personal banking, this side of the business lets customers use credit, basic banking tools, and financial advice to control their money.One
Retail banking comprises a wide array of products and services, including:
-
Checking and savings accounts
-
Certificates of deposit (CDs)
-
Mortgages
-
Automobile financing
-
Creditcards
-
Lines of credit such as home equity lines of credit (HELOCs) and other personal credit products
-
Foreign currency and remittance services
Retail banking clients may additionally be given the following services, often through another division or affiliate of the bank:
-
Stockbrokerage (discount and full-service)
-
Insurance Wealth management
-
Private banking
The amount of personalized retail banking services supplied to a client relies on their income level and the extent of their connection with the bank. While a teller or customer service representative would normally 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 connection with the bank.
Retail banks still have brick-and-mortar locations, but retail banking is likely an area of banking that has been most influenced by technology, owing to the growth of automated teller machines (ATMs) and the popularity of online and telephone banking.
Corporate Banking
Corporate banking, also known as business banking, often services a varied clientele, ranging from small- to midsized local firms with a few million dollars in revenue to enormous conglomerates with billions in sales and offices across the country. The word was initially used in the U.S. to distinguish this line of business from investment banking after the Glass-Steagall Act of 1933 separated the two sectors.
After that prohibition was overturned in the late 1990s, corporate banking and investment banking services have been offered for many years under the same cover by most banks in the U.S. and worldwide. Corporate banking is an important profit area for most banks. But being the largest category of client loans, it also is the source of recurring writedowns for loans that have deteriorated.
Commercial banks offer more than only deposit and withdrawal of corporate cash. The following goods and services, among others, to companies and other financial institutions:
-
Loans and other credit goods
-
Treasury and cash management services
-
Equipment lending
-
Commercial real estate
-
Trade finance
-
Employer services
Some banks will enable firms to have a warm card to allow employees to deposit into the business accounts. Through their investment banking units, commercial banks also offer associated services to their corporate clients, such as asset management and securities underwriting.
Read Also: What Are Savings How To Calculate Your Savings
Special Considerations
The financial industry is one of the most significant sections of the economy—both local and global. In the first place, consumers—both personal and commercial—deposit their money into savings accounts, which banks utilize to lend to others. Banks also assist produce credit, enable commerce, and contribute in the production of capital.
When banks have troubles, the economy might suffer. Take the 2007-2008 financial crisis as an example. The crisis had its roots in the U.S. housing bubble and the excessive exposure of banks and financial institutions throughout the world to derivatives and securities based on U.S. house values. Banks grew increasingly unwilling to lend money, either to their competitors or to firms.
This led in a near-total standstill in the global banking and lending mechanism, producing the most severe recession globally since the Great 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 centrality to the international financial system.
What Are Some Benefits of Corporate Banking?
Having a corporate account boosts a company' legitimacy. Maintaining separate bank accounts for personal and business activities might help the firm look more professional. Having this form of account also opens the firm to wider investment choices, may give liability protection, can enhance financial administration, and make financial transactions easier.
What Are the Main Types of Retail Banks?
In general, commercial banks, credit unions, and certain investment banks offer retail banking services for individual and family clients.
How Does a Corporate Bank Make Money?
All banks normally generate money from what they term the spread, or the difference between the interest rate they pay for deposits and the interest rate they get on the loans they make. They also receive money on the securities they own. They also earn fees for consumer services they provide, including as checking accounts, financial counseling, loan servicing, marketing other financial goods (such as insurance and mutual funds).
The Bottom Line
Retail banking is the section of a bank that interacts directly with individual, non-business customers. This function takes in consumer deposits that essentially enable banks to offer loans to their retail and commercial customers. Corporate, or business, banking works with corporate and other business customers of varied sizes. Among a range of services, this sort of bank lends to enable businesses to develop and hire people, helping to the expansion of the economy.
.webp)
