Retail banking is a financial institution’s direct interaction with consumers. Typical services: savings and transaction accounts; mortgages; personal loans; debit and credit cards, among others. Working mechanism: The Law of Large Numbers Aids in determining the success of multi-level marketing operations due to its wide appeal among customers. Distribution – branch, channels Branding Customer service
The phrase is most often used to distinguish consumer-facing financial services from investment banking, commercial banking, and wholesale banking. It may also be used to refer to a bank’s section that handles personal customers.
The Impact of Retail Banking In Indian Economy
In India, retail banking has long been a reality. It has always been present in India in one form or another. For many lenders, the most recent years have seen it become synonymous with traditional banking. Housing loans, durable goods consumption loans, automobile loans, credit cards, and educational loans are among the typical services offered by Indian retail banks.
To promote their products, different banks offer attractive brand names to distinguish the goods provided by various lenders. According to the Report on Trend and Progress of India, 2003-04, loan values of these retail lending are typically below Rs.20,000 to Rs.100. The loans are generally for five to seven years with housing loans available for a longer term.
In the realm of e-commerce, credit cards are also a fast-growing subsector. With retail portfolio accounting for 21.5% of total outstanding loans as of March 2004, retail lending has become a key profit source for banks. The overall loan impairment ratio was lower than the gross NPA ratio for the entire loan portfolio in recent years.
Benefits of Retail Banking for Banks
Banks have access to benefits in retail banking that fintechs do not, namely the ability to cross-sell products and services based on existing customer lending behavior and demographics.
“Retail banks rely primarily on cross-selling products to their customers for growth; while third party providers must acquire a new clientele through marketing.”
This is particularly true if we consider that one of the main advantages of using financial technology solutions is their cost reduction compared with traditional banking fees. And yet, many of these solutions will always want to act as an intermediary between a bank and its clients (and their data). It’s no wonder why today’s top ten tech companies are also investing in developing innovative financial services.
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