Retail Banking
A retail bank directly deals with individual customers by providing them with basic banking services like checking and savings bank accounts, mortgages, personal loans, debit cards, credit cards and safe deposit boxes. Retail banks always have a head office, and large number of branches in different locations to target a wide range of customers. In addition to this it also provide services to retail customers and commercial businesses.
A retail bank provides various services to their client allowing them to purchase multiple financial instruments, under one roof. While some of the retail banks venture into other services such as wealth management, private banking, retirement and brokerage accounts, which are linked to core retail banking accounts for transnational ease.
A retail bank works with consumers, offering basic banking services. Retail customers are members of the general public taking care of personal needs as opposed to organizations such as governments and businesses that might need more complex services. In short, Retail banking is a service based on consumer-orientation.
How Retail Banks Work
The depositors fund are utilized by the banks for providing loans. These loans provided are charged at higher rates. Reserve Bank of India regulates the banking system in India. As per the Banking regulation, every bank is required to keep around 10% of their deposits as reserve every day, expect for the small banks. The remaining balance at the bank are allowed to lend out.
Retail Banking Decision Making
The rising popularity of retail banking in the developing economies can be irradiated on account of a few major developments. The first of them is the transitioning of the economies into the intermediate phase.
In the early phase of development of banking, the policy makers focused on ensuring the flow of bank credit to the productive sectors of the economy. But over time, as the credit demand from the basic industrial and infrastructure sectors have waned somewhat, the regulators have become more accommodating in allowing the banks to lend even for consumption purposes.
Technology has provided an enhancement to retail banking from its additional benefits. Since retail banking require huge production techniques, technology helps bank to design appropriate channel for working conditions. The growing interest in retail banking is due to quest for new sources of revenue and new channels for profit.
Conclusion
It is essential for the banks to keep pushing the edges of innovation and experimentation in the retail banking space to survive and also to remain relevant. One of the most crucial elements of a strong customer bank relationship is the bank’s understanding of customer needs and preferences. However, with the massive increase in their size and their customer base, the banks have slowly drifted away from understanding their customers’ needs and preferences closely. Further, the rise of alternate delivery channels has necessitated that banks build their presence across all channels to offer their services to their customers. The challenges for the banks is to design products/systems which are channel/segment uncertain.
While retail banking offers remarkable opportunities for growth, the challenges are equally overwhelming. The demanding regulatory requirements on the consumer protection front, risks from a slowing global economy and increasing customer prospects mean that banks must innovate to grow.
