Retail banking has certain common significant features across the world. The products and services under retail banking are designed to be uniform. In other words, they are ‘off-the-shelf’ products without any personalisation for individual customers.
They are comparable to products offered at branded retail stores. Customers pay for what they see in retail shops and what is stated on the price tag. The products and services provided are uniform, transparently priced and non-discriminatory. The products provided by retail banks are also usually available with comparable features.
Retail banking products are offered across multiple channels and at multiple places (branch, internet, ATM, telephone). Retail banks strive to build an infrastructure for the most effective delivery of these services. Since retail (mass) banking includes reaching out to a large group of people, they need to have suitable systems, structure, resources and procedures in place. This is necessary to reach out and sell appropriate services to the target clientele taking into account their specific needs, behaviour & other dynamics. Retail Banking is a critical part of every economy in the world and has the following key areas of strength:
Banks regarded consumer loans with scepticism for several years. Commercial loans dominated the loan portfolio because of elevated net yield, with a low credit risk being generated. Consumer loans on the other hand involved smaller amounts, required a large number of staff to handle accounts and high default rates. Even regulators around the globe have recently realised the need to encourage retail banking. However, strong competition has reduced spread and profitability in commercial loans over the previous few years. With new regulations and an increase in demand for consumer loans, the risk-adjusted return in retail banking has surpassed those of corporate banking.
Retail banking offers a wide variety of products and services such as deposit products, auto loans, car loans, home loans, equity loans, mortgage loans, bill payments, debit cards, credit cards, etc. This wide range offers banks the chance to diversify their portfolio of assets for higher profits, and spread risks across a wider base of customers.
Increase in per-capita income leads to an upward shift in lifestyle and better standard of living in any economy. Retail Banking offers its clients all these products and services (home loans, car loans, personal loans, etc.), which they require as their incomes and lifestyles change. Retail banking can contribute to the fulfilment of people’s desires by providing accessible credit.
An individual customer is ideally the deity of the bank in the retail banking business. All products and services are designed to fulfil needs and wants of the customer. Customers in retail banking belong to different economic, cultural, educational, and social backgrounds, so their demands are also diverse. In the case of individual customers, it is the adoption of banking products and customer satisfaction that generates profit. Hence, customer service and quality execution through use of CRM tools help banks succeed in this competitive world.
The scope for growth of financial services is unlimited. The opportunity is for banks to approach the client, find out their economic needs and problems, design the appropriate products and services, market them, and sell them to fulfil their needs. Innovation is a key part of retail banking and most of the biggest innovations in banking in the last 75 years have come out of retail banking.
Retail banking allows banks to make use of current capacity and reach a wider client base. Banks can make use of the rich repository of information gathered from their day-to-day transactions. Banks are acquiring huge amounts of client data in the process of expanding their range of services. If this data is recorded systematically, banks can use this data effectively to discover fresh segments and to cross -sell new services. Retail banking provides tremendous opportunities for any financial institution to benefit from global expansion and derive economies of scale by serving a large number of customers.