Difference Between Retail Banking and Corporate Banking (With Table)

Banking plays a vital role in our economy. They ensure that the transactions happen swiftly and without any disturbance. They are a financial system that can lend money to people (common or business needs) for personal or professional needs. Mostly all the economic functions are done through or by the bank. Salaries, bills, savings, loans, e-payments are all possible because of the banks.

Banks act as an intermediary between people. They help in facilitating commerce. Commercial banking, payments banks, cooperative, merchant banking, retail, corporate banking, etc., are a few parts and types of banks.

Retail Banking vs Corporate Banking

The difference between retail banking and corporate banking is that retail banking is a unit that deals with retail customers/ consumers, whereas corporate banking is a unit that deals with large corporate clients. Retail banking has a lower transaction level and higher client base, whereas corporate baking has a higher transaction level and lesser client base.

Retail banking is a sector of banking services that deals with consumers/the general public. The services that come under this are personal loans, debit and credit cards, mortgages, provision of savings, etc. there are even sub-types of retail banks. It is a face-to-face method of providing services. They act as a one-stop shop for all their customers. The customer’s deposit is the most important source of the fund of retail banking.

Corporate banking is a sector of banking service that deals with only corporate firms/businesses. They work directly with them and alter and provide services according to their needs. Corporate provides them loans, credits, savings account, checking accounts, etc. All these are specially designed and served to small to middle-sized businesses and large conglomerates.

Comparison Table Between Retail Banking and Corporate Banking

 Parameters of ComparisonRetail Banking  Corporate Banking
 Meaning Retail banking is a sector of banking service that deals with individuals/the general public. Corporate banking is a sector of banking service that deals with corporate and business firms.
 Nature of Product/Service It is the same ( standardized) for every individual. It is specially designed and customized according to their client’s needs.
 Clientele Large.
As the general public is more in number
 Comparatively small
 Processing Cost Low processing costs High processing costs
 Also Known as Consumer banking or personal banking. Business banking
 Value of Transactions Lower value Higher value

What is Retail Banking?

Retail banking is a sector or model which deals with the general public/ individuals. It is a basic one-stop store banking that provides its customers with personal attention to provide them with their needs. It is also called consumer banking or personal banking. 

There are hundreds of bank branches in different locations in each city to provide their customers with the best.

There are a few characteristics of retail banking –

  1. They help with various products and services – credit and debit cards, personal loans, mortgages, insurance, locker facility, etc.
  2. Various consumer groups – households, trusts, individual small or medium enterprises (SME), etc.
  3. Various channels of distribution – websites, branches, online/mobile applications, call centres, etc.

Types of retail banking –

  1. Commercial banking – they are banks in general. Services like personal banking, online banking, lending or borrowing, etc.
  2. Private Banks – operates in urban areas, takes care of high-level income groups, etc.
  3. Credit unions – similar to commercial banks but on a smaller scale (not for profit institutions)
  4. Regional rural banks – Gramin banks are regional level banks to serve low-income groups.

Retail banking is a part of an individual’s day-to-day life. It proves to be an important component of both traditional and modern banking. It is known to provide more liquidity as they influence the money supply. They offer competitive interest rates to lower the cost of borrowing.

What is Corporate Banking?

Corporate banking refers to the sector or a part of the bank that deals with the corporate customers (private limited companies, public limited companies, etc.). They work directly with the business and design special services/products according to their clients’ needs. It is also called business banking.

By helping them with their services, they enable the businesses to grow, which in turn contributes to the expansion of the economy. They cater to the needs of small-midsized local businesses to large conglomerates. To maximize their business, corporate banks usually hire relationship management to maintain a good client relationship.

The services they offer –

  1. Commercial banking activities- term loans, line of credits, e-banking, trade finance, etc
  2. Services for MNC’sMNC’s and government bodies – international transactions, advisory services, cash management, underwriting of securities, etc.
  3. Etc

A business needs to have a corporate account even if it is for advisory purpose as self-accounting and professionalism is essential for a business. The processing costs are high, just like their value of the transaction, compared to other sectors of banking. Corporate banking can be more profitable. The credit rating can affect the share or valuation price of a company. Interest and fees charged on the services provided are the main sources of profit. They work and give rapid/ urgent solutions to their clients. 

Corporate banking generally has a small customer base.

Main Differences Between Retail Banking and Corporate Banking

  1. Retail banking is a sector or a part of banking service that deals with individual consumers/ general public, whereas corporate banking is a section of banking service that deals with only corporate/ businesses.
  2. Retail banking provides the same (standardized) kind of services to all their customers, whereas corporate banking customizes its services according to their customer’s needs.
  3. Retail banking has a large client base as it includes all individuals, whereas corporate banking has a comparatively lesser clientele.
  4. Retail banking has a low processing/ handling cost, whereas corporate banking has a high processing cost.
  5. Retail banking is also known as consumer banking, whereas corporate banking is also known as business banking
  6. Retail banking has a low value of transactional value, whereas corporate banking has a high value of the transaction as it is related to businesses.

Conclusion

Retail banking and corporate banking are systems of banking services. They both have few same functions but with different client bases. Each bank has its ways of dealing with its customers to gain and attract clients.

Banking systems are essential to keep our economy working; there should be movement of money. When banks have problems, it has a negative effect on the economy. Hence it needs to function without any interruption.

References

  1. https://www.emerald.com/insight/content/doi/10.1108/09564239410068670/full/html
  2. https://www.emerald.com/insight/content/doi/10.1108/02652329210012122/full/html
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