4 Key Differences between Retail and Corporate Banking

Gone are the days when banking activities consisted of long queues, droves of paperwork, and confusion about available banking services.

The banking sector flourishes in this new digital era, and banks now use online banking, mobile banking, and other tailor-made financial solutions to grow their customer bases.

Banking activities, done online and off the internet, usually fall under these 2 major categories: retail banking and corporate banking.  

Both retail banking and corporate banking cater to particular segments of the market. Both are bedrocks for healthy economic activity, but there are several key differences that set these two apart. They can be summed up as pertaining to purpose, clientele, services offered, and levels of transaction.

In this article, you will get to know the difference between retail and corporate banking, plus how to tell if banking technologies are worth their salt. Learn what level of banking activity is needed for particular situations—and in the process, get smarter about your finances!

Rationale

The first thing that sets retail and corporate banking apart is what purpose each serves. It’s important to know what kind of activity either of these caters to.

Retail banking is concerned primarily with individual consumers. That’s why it’s also referred to as “personal banking” or “consumer banking.” It’s a means for the everyday consumer to manage their individual finances.

On the other hand, corporate banking pertains to services that are crafted for the corporate sector. This type of banking is also known as “business banking.” It comprises upscaled, sophisticated financial management services that can sustain whole institutions, not just individuals. Banks derive much of their profit from corporate clients, so this is an important class of activity.

Clientele

The second key difference between retail and corporate banking is who they service. The question of how they service clients should also be taken into consideration.

In retail banking, the clients are individual customers. Retail banking involves one-to-one services so that individuals can fulfil everyday needs.

Some examples of these needs are: having a safe place to store one’s savings, paying household bills, and managing personal credit. They’re typically addressed by local branch banking services. Individual customers tend to value convenience and “one-stop shop” functionality in retail banking.

In corporate banking, however, the client base consists of whole organisations that are typically mid-scale to large corporate firms. Corporate banking services demand a high level of relations from each client. Clients, in turn, look for banking partners that can optimise complex financial processes. That’s what they need in order to run their businesses smoothly.

Services Offered

There’s also a difference in the particular services offered per sector of banking. Both, however, can bequite exhaustive.

Some examples of services in retail banking include:

• User-friendly and responsive deposit products
• Loans and credit programs, both of which are becoming increasingly personalized
• Fast, convenient, and affordable payment schemes
• Omnichannel digital banking (through bank website, apps, and the like)

Conversely, some examples of corporate banking services are:

• Credit management for individual corporations
• Real-time cash and liquidity management solutions
• Trade financing solutions, such as guarantees and documentary credit
• Treasury and cash management services
• Equipment financing
• Banking solutions for the use of corporate executives, decision makers, and financial controllers

The exact range of services differs from bank to bank. Your banking partner should be happy to outline all of these for you.

Costs and Level of Transaction

The last points of difference between retail banking and corporate banking are cost and level of transaction. In these respects, there’s quite a difference indeed between the two.

In retail banking, the customer’s deposit is the primary source of funds. Cash deposits are used by banks to make loans available to other retail clients. Compared to corporate banking, low processing costs are demanded of retail banking customers.

It’s the opposite for corporate banking. These banking activities always come with high processing costs. Banks earn from corporations in two ways: from interest and fees collected for high levels of service.

The Challenges of the Banking Sector

Given the variety of activities they oversee, modern banks have some challenges to face. Among the most important are the following.

• Banks always have to find new ways to fulfil the needs of their clients. They can’t do so with generic, blanket approaches to banking. It serves banks well to know their clients better and to cater to several different types of financial need.
  
• Banks should leverage data analytics and emergent technologies to stay ahead of the game. These two are important in getting a competitive edge over other banks.
  
• Banks should be part of a robust financial ecosystem that innovates for the sake of consumers. Retail and corporate banking services should empower customers and help achieve their financial goals.

If a bank can withstand such challenges, however, they will be viable in this era and the next. When you’re on the lookout for either retail or corporate banking solutions, choose a forward-thinking and service-oriented banking partner.