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Retail banking is banking that provides direct services to consumers. Many people with bank accounts have their accounts at a retail bank and banks that offer retail services may also have merchant and commercial branches that work with businesses. For people with high net worth and special banking needs, private banking services may be pursued. These offer a high level of service with a number of options that are not available to average members of the public.
The most basic retail banking services include savings and checking accounts. Most retail banks, however, try to make themselves into a one stop shop for banking customers to increase customer retention and loyalty, ensuring that the bank has a steady supply of customers. Expanding banking services also provides more opportunities for the bank to turn a profit.
Other services can include safe deposit boxes, home and car loans, certificates of deposit, retirement accounts, and investment services. Most retail banks provide customers with debit and credit cards, as well as financing options like home equity lines of credit. Depending on banking regulations, a bank may not be able to offer all of these services at one location, but it can partner with other financial institutions to provide conveniently linked services for bank customers. This type of banking is designed to provide people with banking services for life, from college funds opened at the birth of a child to retirement trusts established to pay for old age.
Retail banking is a highly competitive market. Many people need these services, and they are not afraid to shop around to find the bank offering the best incentives, rates, and deals. Banks can compete with interest rates, account perks such as credit monitoring, and other services designed to entice customers. Some even provide special incentives for customers switching over from rivals, such as bonuses awarded when transferring funds from a rival bank to open a new account.
Some retail banks are international corporations with many branch banks all over the world, while others operate on a national level. Smaller retail banks may be regional or may even have single branches. Community banks may offer services customized to local members and sometimes receive government incentives for community reinvestment, such as offering small business loans and home loans to people in the community. It is sometimes possible to get more favorable interest rates on such activities from community banks than it is from larger establishments.
"@SurfNturf" - I know that most people don’t think about that. I wanted to add that the retail banking trends are leading more to additional conveniences.
For example, Chase is allowing customers to withdrawal funds from any Walgreens with no additional charges and allowing customers to make check deposits with their cell phones.
This really helps if you don’t have a Chase branch nearby but do have a Walgreens.
Also online banking and emailed banking statements are all ways to offer the customer more convenience and save the bank some money. Other gimmicks that banks are using involve their credit cards.
They offer a variety of credit cards that provide various rewards for those that use the
cards regularly. The problem with these cards is that the banks tend to charge higher interest rates on these cards in order to offset the cost of the rewards.
If you choose a rewards card it is best to pay your balance at the end of the month because if not the interest rate that you will be charged will exceed whatever reward you actually get from the bank.
"@Subway11" - I agree with you because sometimes these investments can get complicated and it is nice to have someone that can explain everything to you.
I know that a lot of banks are promoting their home equity lines of credit. This type of product is the least risky product for a bank because they can place a lien on your home if you default they can force the sale of your home in order to get their money.
These types of loans are considered recourse loans so the bank can pursue legal action if any money is owed to the bank even after your home is sold.
They usually try to market these loans as a way to consolidate credit card debt which is taking unsecured debt and turning it into secured debt. Banks like these loans because it keeps the customer vested with the bank for a while.
"@Moldova" - I think that it makes a lot of sense to offer more banking services to your customers because a lot of people like the convenience of dealing with one bank and like the idea of having all of their accounts in one place.
I know some banks like Chase have licensed financial advisors that offer all of their customer’s assistance on their financial investment needs. For example, a friend of mine went into a Chase branch the other day and spoke with a licensed banking representative that offered her advice on municipal bonds.
It is really nice that you can buy municipal bonds at your bank in which you already have a banking relationship with then having to go to a bond dealer in order to buy the bond.
It feels more comfortable to talk to someone that you already know then having to start a whole new relationship.
I just wanted to say that a lot of retail banking trends are going to developing retail investment banking services in order to grow the bank’s market share.
Bank of America for example, has partnered up with Merrill Lynch in order to offer investment services to their customers so that they can have all of their financial needs in one bank.
The program is called Merrill edge and it offers self managed investment accounts and actively managed accounts for those customers with initial balances of $25,000 or more to invest.
Other banks like HSBC offer their elite customers which are referred to as Premier customers a comprehensive wealth management system.
This includes estate planning, retirement investing, business succession, and insurance needs. Customers qualifying for these services have to have an initial deposit of $100,000 or a qualifying mortgage of $500,000 or more.
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