COMMERCIAL BANKS ENTER THE RETAIL BANKING MARKET

With few exceptions, joint-stock (shareholder-owned) commercial banks only came to appreciate the potential of the retail market in the decades immediately after the Second World War. It was a slow awakening and took place at a time when banking was being deregulated all over the world. Demutualisation of building societies (in the UK, Ireland, South Africa, Australia and New Zealand), savings and loan associations (in the US), and savings banks and the like (in mainland Europe) became commonplace u2013 and were eventually absorbed into commercial banks. Many nationalised commercial banks went the same way, as did some postal banks.

By the 1980s it was commonplace for commercial banks across the world to offer retail customers current/checking/salary accounts with chequebooks for making payments, as well as deposit and savings accounts. Branches and ATMs proliferated, along with a variety of plastic cards variously used to guarantee cheques and withdraw cash. Other products on offer included travellers cheques, brokerage, safe deposit boxes, inheritance planning and Wills, as well as insurance.

By the 1980s bank branches, typically serving consumers and businesses alike, proliferated across the world, a trend that is now reversing as people switch to branchless banks. With the exception of the Europe-based colonial banks and the foreign branches of some American, Australian and other commercial banks, hardly any bank thought of offering retail services outside the domestic market. The revolution in computer technology changed that.u00a0 u00a0

The technology revolution

The technology revolution of the latter decades of the 20^th century was the ultimate stimulus that made mass market consumer banking possible across the world. It enabled banks to deal with vast numbers of consumers at much reduced cost.

Two inventions in particular became important milestones in the lift-off of the new industry:

The launch of the credit card in the US in the 1950s, and its subsequent growth worldwide alongside the debit card (see table Payment Card Transactions by Billions 2012-2021).
The invention of the ATM, or cash dispenser as it was first called in the UK in 1966.

The growth of cards

In parallel with the growth of credit and debit cards (also called general purpose payment cards) ATM networks were spreading rapidly around the world, outside and inside branches, in retail outlets, and wherever people congregated. Payment cards and debit cards in particular became the main way for consumers to get cash from ATMs, as well as for retail payments.

Despite the multitude of branches, ATMs, and payment cards that have existed in global banking for decades, there remains a vast population of unbanked persons, often earning too little to afford a bank account. Many of these are emigrants working overseas but without access to full banking services. They rely instead on remittance businesses, the largest of which is the US company Western Union. By 2020 a proliferation of digital players had entered the market. Transfer fees for cross-border remittances vary considerably (see table) and remain a considerable source of income to many countries, and in some cases, the main source.

The structure of a bank

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In the diagramme below, we visually describe the structure of a commercial bank, including a retail bank, corporate bank and investment bank. It describes the shared functions within the bank, such as operations and IT and technology. It also indicates the areas of expertise that are covered in this level and Level II of the Certified International Retail Banker programme.

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