Difference between Retail Banking and Corporate Banking

Difference between Retail Banking and Corporate Banking:

Banks are supposed to provide financial products and service to their customers. The banking sector has developed in a broad way in past few decades. If we wish to divide banking services in two major divisions then it will be retail banking and corporate banking. Banks earn revenue on by taking public money and lending money to the public.

When bank takes customer’s money as deposit, it has to pay interest to the customer. The same way, when customer takes money as loan from bank, the the customer has to pay interest to the bank. If the load is given to retail customer, it can be a personal loan, home loan, car loan or any other as per bank rules and customer’s purpose for taking the loan.

What is Retail Banking?

Retail Banking is the banking products and services provided to individual customers. The customers are required to visit their bank branch to perform a financial activity. All banks have a large number of customers of retail banking where the bank staff directly deals with customers. Therefore it is also known as personal banking and consumer banking. The retail banking is considered as key factor of profit by most banks of the country.

What is Corporate Banking?

Corporate Banking is a specific sector of bank the deals with business firms and industries. Banks offer large loans and cash credit options to the corporate customers. The banking products and services in corporate banking is much different than retail banking. The banks open current accounts for corporate customers and also offer mortgage loans and overdraft facilities. The treasury and cash management services are also considered under corporate banking.

Basic Functions of Retail Banking

Retail Banking includes various products and services for individual customers of the bank. Here we provide several basic functions of retail banking as under:

  • Retail Banking is a part of bank which directly consults with each and every customer.
  • Retail Banking Activities are generally performed face to face with customers at individual bank branches.
  • Retail Banking creates personal relationship with consumer, therefore it is also called personal banking and consumer banking.
  • Retail Banking includes savings account, checking account, certificate of deposit, ATM debit card, credit card and other products & services.
  • Retail Banking considers customers’ deposits as the primary source of fund.
  • Retail Banking offers personal loan, home loan, vehicle loan, education loan and mortgage loan at attractive interest rates.

Basic Functions of Corporate Banking

  • Corporate Banking is sector that deals with large corporations and business industries.
  • Corporate Banking creates relationship with business groups, therefore it is also known as business banking.
  • United States was the first country to use the word ‘Corporate Banking’ to make it different from investment banking.
  • Corporate Banking includes current account, wealth account, employer services, trade finance and many corporate banking services.
  • Corporate Banking offers business loan, mortgage loan, cash credit, working capital loan, cash and wealth management services.
  • Corporate Banking provides debit cards, credit cards and prepaid cards with higher spending limits to the corporate customers.
  • The primary source of earning in corporate banking is the charges, fees and interest taken by bank for services given to customers.

Difference between Retail Banking and Corporate Banking

Retail Banking and Corporate Banking are two separate sectors of banking industry. Let us have a look on the difference between retail and corporate banking as follows:

Particular Retail Banking Corporate Banking
Definition: Retail Banking means banking products and services provided to individual customers. Corporate Banking means banking products and services provided to business firms and corporations.
Relationship Level: Retail Banking has medium level of Relationship between Banks with Customers. Corporate Banking has higher level of Relationship between Banks and Customers.
Processing Cost: Banks charge low processing cost to individual customers. Banks charge high processing cost to corporate customers.
Transaction Limit: Transaction Limit is fixed to specific criteria for retail banking customers. Transaction Limit is much higher for corporate banking customers.
Interest Rates and Fees: Retail Banking Customers are required to pay low fees and interest on bank loans and other transactions. Corporate Banking Customers are charged higher fees and interest rates as their bank loans and transactions are of higher amount.
Earning Profit: Banks earn profit from the difference between interest paid and interest charged to retail banking customers. Banks earn profit from fees and charges for special services provided to corporate banking customers.
Products Offered: Savings Account, Checking Account, Certificate of Deposit, Retirement Plan, Debit Card, Credit Card and Various Loans. Business Account, Current Account, Overdraft Facility, Mortgage Loan, Unsecured Loan, Trade Finance, Foreign Exchange and many others.

Online Retail Banking

Internet Banking is the most useful services for individual customers. Almost all banks provide free online banking service to its retail customers. The online retail banking is operated by customer’s unique username and password. Banks develop a separate section for internet banking on their website. The customers can easily access their bank accounts and perform financial transaction from their home. Retail customers can check their account balance, apply for checkbook, get account statement and other information by using online retail banking.

Online Corporate Banking

Internet Banking Service provided to corporate customers is known as online corporate banking. This service is similar to online retail banking, but services are different and limits are higher for corporate banking customers. The business industries can sign in to their online banking from their office and access their account activities. By using internet banking service, they can check their balance, account statement, check clearance status and much more.

 

Updated: April 8, 2019 — 6:21 am

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