Retail vs Wholesale Banking: Difference and Comparison

In today’s scenario, everything is revolutionized towards going globally digitally. The use of plastic money has increased in the last five years. But an individual must have a bank account to use this plastic money.

It may be a Retail Banking Account (for personal use) or a Wholesale Banking Account (for large customers, companies, or organizations).

Thus, with these banking accounts, you can take a loan from any bank now, which is super easy in return for mortgaging – a house, land, property, gold, etc. The two are the types of banking.

Key Takeaways

  1. Retail banking deals with individuals and small businesses, providing services such as deposits, loans, and credit cards, while wholesale banking deals with large corporations, governments, and financial institutions, providing underwriting and investment banking services.
  2. Retail banking services are more standardized and transaction-oriented, while wholesale banking services are more customized and relationship-oriented.
  3. Retail banking is more regulated than wholesale banking, with a greater emphasis on consumer protection and transparency.

Retail Banking vs Wholesale Banking

Retail banking, also known as consumer banking or personal banking, refers to the banking services provided to individual customers or small businesses. Wholesale banking refers to the services provided to large businesses, corporations, government entities, and institutional clients.

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Banking Quiz

Test your knowledge about topics related to banking

1 / 10

Which banks do not accept deposits?

2 / 10

Which of the following is NOT among the functions of a central bank?

3 / 10

Retail Banking means 

4 / 10

Which of the following maybe the reason for returning a check?

5 / 10

What is a balance transfer in the context of credit cards?

6 / 10

A loan to pay for a home, business or other real estates over a period of time is a:

7 / 10

What is the most common type of account for individuals to save money in a bank?

8 / 10

What is the name of the type of loan where the borrower can use the loan proceeds for any purpose, without specifying the end use of the funds?

9 / 10

What is the name of the investment vehicle where a group of individuals pool their money to invest in a portfolio of securities?

10 / 10

What is the name of the type of loan used for financing the purchase of a car?

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Retail Banking vs Wholesale Banking

Retail Banking deals with retail customers or, says, an individual. The money transaction of retail bank account holders is fewer but is in larger numbers.

Although all the banks serve their customers with the same services and benefits, the difference comes with the staff’s hospitality towards their clients.

Wholesale Banking focuses on large groups or organizations, or companies. The number of customers is few, but the bank transactions of these organizations or companies are enormous.

The bank also charges them high-interest rates on transactions. Also, wholesale banks provide individual bankers to the organization or companies to serve them with close attention or quick response.

Comparison Table

Parameters of ComparisonRetail BankingWholesale Banking
MeaningIt details retail individuals.It deals with large organizations, companies, or groups.
Size of LoanIt is low, and due to this impact, NPA is diversified.It is high, and because of this impact of NPA is more.
Interest RatesInterest rates are lower as they do not have the power to bargain.Interest rates of wholesale banks are large to attract funds from them.
Monitoring and RecoveryIt is not easy.It is easy.
ExampleEducation, Housing, Gold, and Car loans are some of their examples.Some examples are loans given for setting industries, export, machinery, etc.

What is Retail Banking?

It is also known as a consumer or personal banking. Retail banks deal with the common people rather than any company or organization. The main functions of retail banking are –

  1. Retail banks provide safety and security for the general public’s money and offer deposits in saving accounts, fixed deposits, etc.
  2. Bank offers credit and loans on some interest value by mortgaging – property, house, gold, etc.
  3. Banks also help public customers to invest their money in banks’ different insurance and policies. 

The advantages of Retail banks are that they stress upon small businesses and local people for earning. Considering the earlier records, retail banks have increased their profit and business for their respective banks.

And these banks are a large part of revenue collection and play a vital role in economic development. The services including in retail banking are – 

Saving Account – The customer can open an account to deposit their money, and interest can be taken from the bank. 

Loans – Banks provide loans to their valuable customers for different purposes like education, housing, car, gold, etc.

Debit & Credit Cards – Bank provides plastic money which can be used instead of cash payments.

The debit card is given for a savings or current account, and the transaction is limited to the balance in your respective account, while Credit card banks allow you to make payments. In response, you will pay the whole amount later with the additional charges.

ATM Cards – ATM card is restricted for withdrawal payment and other transactions only in ATMs.

retail banking

What is Wholesale Banking?

Wholesale Bank services many companies, organizations, real estate workers, and mortgage brokers. Wholesale banking services include – large trading transactions, currency conversion, underwriting, consultancy, merging, etc.

For claiming a loan from a wholesale, your company must have a strong financial statement on a large scale. Wholesale banking is the mediator of lending and borrowing money from other banks. 

Some of the features of Wholesale banking are as follows – 

  1. High Risk – In Wholesale banking, the risk factor is quite huge. If the borrower company gets dissolved, the associate parties and workers also fail.
  2. High Cost of Deposit – The interest cost paid by the bank on depositing the money by these companies is high.
  3. Low Operational Cost – The interest cost of transactions these companies and organizations carry out is relatively low because of the fewer customers and transactions. 
wholesale banking

Main Differences Between Retail Banking and Wholesale Banking

  1. Retail Banking deals with individuals and focuses mainly on retail customers, while Wholesale Banking focuses on a larger group of individuals or organizations or companies. 
  2. Retail Banking requires an extensive network to run smoothly, while Wholesale Banking does not require many branches to cater; thus, only a few wholesale bank branches are available. 
  3. The size of the loans provided to the retailer and wholesaler is different as being a retail customer, the amount of loan money is less. In contrast, wholesale customers are given a lot of loan money to set up their industry, machinery, etc. 
  4. Retail bank customers are given loans at a very low-cost interest rate. This is because retailers do not have the power to negotiate. In contrast, wholesale bank holders are meant to pay a whopping interest. The banks do this to attract their funds. 
  5. Examples of Retail Banking Loans are – Education, Housing, Car Loans, etc., while Wholesale Banking Loans are – Loans taken to set up their industry, machinery, exporting, etc. 
Difference Between X and Y 2023 04 24T085057.455
References
  1. https://www.emerald.com/insight/content/doi/10.1108/IMDS-02-2013-0078/full/html
  2. https://www.aeaweb.org/articles?id=10.1257/aer.100.2.408

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