What Is Retail Banking?

Retail banking involves providing individuals, and sometimes small businesses, with financial services such as checking and savings accounts, credit cards, auto loans, mortgages, insurance and investments. Retail banks include credit unions and small community banks as well as the retail banking operations of large commercial banks. Some financial services providers such as savings and loans offer a limited set of retail banking services. Talk to a financial advisor about how to select a bank that will suit your own needs.

Retail Bank Basics

Retail banks are the first and most important access points to the financial services industry for the typical consumer. When an individual opens a checking or savings account, applies for a credit card, takes out a loan to purchase an automobile, or a mortgage to buy a home, it will usually be done at a retail bank. Retail banks are also referred to as consumer banks or personal banks.

The functions of retail banking can also be delivered by financial services providers that aren’t called banks. Credit unions, for instance, are non-profit cooperatives that function as retail banks for many individual banking consumers. Some large non-bank financial institutions, such as hedge funds, also offer retail bank-type services such as checking and savings accounts.

Retail banks are just one of several types of banks. Commercial banks, including many that have retail banking arms, provide banking services to corporations and other institutions. Central banks manage a country’s money supply, set interest rates and supervise retail and commercial banks.

Retail banking services may be delivered face-to-face in brick-and-mortar branches, through a smartphone app, online via the website or by telephone. Many banks offer all or most of these services. Online-only retail banks are a relatively recent addition to the ranks of retail banks and their numbers are increasing as consumers embrace online access to retail banking.

Retail Bank Services

Retail banks offer a wide variety of financial services to their individual consumer customers. These can typically include:

Checking accounts
Savings accounts
Credit cards
Automobile loans
Boat and recreational vehicle loans
Home mortgages
Home equity loans
Student loans
Insurance
Investments
Trust services

Not all retail banks offer every service, and some banks offer additional ones, such as agricultural loans. Large commercial and investment banks give their corporate and institutional customers non-retail services such as access to capital markets through offerings of debt and equity securities.

Retail Bank Regulators

In the United States, financial institutions serving as retail banks may be regulated by a number of different government overseers. A patchwork of different federal and state entities reviews bank lending and deposit-taking activity to ensure compliance with relevant regulations and laws. Regulators also may investigate consumer complaints.

Additional government agencies provide insurance to protect depositors from financial loss in the event of bank failure. These agencies charge banks premiums for insurance and also examine banks to check their financial soundness.

Office of the Comptroller of the Currency (OCC): The OCC regulates national banks and federal savings associations.
National Credit Union Administration (NCUA): The NCUA oversees federally chartered credit unions.
Federal Reserve Board: The Federal Reserve supervises state-chartered banks that belong to the Federal Reserve System.
Federal Deposit Insurance Corporation (FDIC): The FDIC insures deposits in banks and federal savings associations.
State regulators: Every state has its own regulatory apparatus to ensure the safety and soundness of its state-chartered banks and protect consumers.

How Retail Banks Make Money

Retail banks generate revenues mostly through fees and interest rate spreads. Fees include monthly charges for checking and savings accounts, credit card annual fees, late fees, and transfer fees. The interest rate spread is the difference between the interest rate they pay on deposits and the interest rate they collect on loans. Many banks also make a lot of their money through investing the money that is deposited at the bank with them. They keep enough on hand for withdrawals and earn a return on the rest.

How to Choose a Retail Bank

Choosing the right retail bank involves more than just picking the one closest to home. The best option for you will depend on your financial goals, daily banking needs, and personal preferences. Here are key factors to consider when evaluating your choices:

Fees and Interest Rates. Look closely at what the bank charges for account maintenance, overdrafts, wire transfers and ATM usage. Also consider the interest rates offered on savings accounts, CDs, and loans. Some online banks offer higher yields and fewer fees compared to traditional banks.
Convenience and Access. Think about how you prefer to bank. Do you want access to a local branch, or are you comfortable with online-only services? Consider the availability of ATMs, branch locations and business hours. If you travel often or live in a rural area, ATM network size and fee reimbursements may matter more.
Customer Service Reputation. Reliable customer support is essential, especially when problems arise. Research reviews and rankings from sources like J.D. Power or the Better Business Bureau. If possible, ask friends or family for recommendations.
Available Services. Make sure the bank offers everything you need both now and in the future, whether it’s basic savings and checking accounts, personal loans, credit cards, home mortgages, or investment and wealth management services.
Tech and Mobile App Quality. A well-designed mobile app can streamline your banking experience. Look for features like mobile check deposit, bill pay, budgeting tools and alerts. App store ratings and customer feedback can give you a sense of how user-friendly the technology is.
FDIC or NCUA Insurance. Confirm that the institution is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This ensures that your deposits are protected up to $250,000 per depositor, per institution, in case of bank failure.

Taking time to evaluate these factors can help you choose a retail bank that supports your lifestyle, offers good value, and provides peace of mind.

Bottom Line

Retail banking gives individuals access to financial services including checking and savings accounts, loans and mortgages, credit cards, insurance, and investment management. Also known as consumer banks or personal banks, retail banks also serve small businesses. Retail banks include small community banks, retail banking arms of large commercial banks, and credit unions.

Tips for Banking

A retail bank can serve many of your financial needs, but for insight and guidance, a financial advisor can be your best bet. It doesn’t have to be difficult to connect with a financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset has researched literally hundreds of banks ranging from multinational institutions to small, local savings and loans and made the reviews available online for free. SmartAsset’s Bank Reviews include brief overviews with discussions of service quality and financial health as well as pros and cons of each bank’s offerings. Reviews also provide details on products, fees and interest rates paid on deposits.