1---
 2meta: 
 3  date: false
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 5title: "Retail Banking - Definition and Meaning"
 6date: 2023-10-05
 7description: "Overview of retail banking encompassing transactions with the general public and distinguishing it from wholesale banking."
 8tags: ["retail banking", "banking", "financial institutions"]
 9---
10
11## Background
12
13Retail banking, also known as consumer banking or personal banking, is a division of banking that deals directly with individual customers and small businesses. It provides a myriad of financial services tailored to meet the needs of this demographic.
14
15## Historical Context
16
17Retail banking has evolved significantly since the early days of banking. Initially, it began with basic deposit and lending services but over time expanded to include a wide variety of services such as mortgages, credit cards, personal loans, and investment services. The advent of technology and internet banking has further revolutionized the landscape, making banking more accessible to the general public.
18
19## Definitions and Concepts
20
21**Retail Banking**: Banking involving transactions with the general public, collecting deposits from individuals and small businesses, and providing loans and other financial services tailored for these groups. The sums involved in these transactions are generally smaller compared to wholesale banking.
22
23**Wholesale Banking**: Unlike retail banking, wholesale banking focuses on large-scale transactions primarily with other regulated financial institutions, large corporations, government agencies, and big investors.
24
25## Major Analytical Frameworks
26
27### Classical Economics
28In classical economics, the significance of retail banking can be tied to its role in channeling savings towards productive investments, thus fostering economic growth through efficient capital allocation.
29
30### Neoclassical Economics
31Retail banking's role in neoclassical economics focuses on the supply and demand of financial products to individuals and small businesses, emphasizing elements such as interest rates, market competition, and consumer choice.
32
33### Keynesian Economics
34From a Keynesian perspective, retail banking is essential in facilitating consumer spending and investment, which in turn drives demand and supports economic stability and growth.
35
36### Marxian Economics
37Marxian analysis might critique retail banking for its role in perpetuating the capitalist system and maintaining the power structures inherent within it, highlighting issues of economic inequality and exploitation.
38
39### Institutional Economics
40Institutional economics would study how retail banking institutions, norms, and rules shape the behavior of individuals and businesses in the economy. Emphasis could be placed on regulatory practices, consumer protection laws, and the stability of banking institutions.
41
42### Behavioral Economics
43Behavioral economics examines the psychological factors behind consumer financial decisions in retail banking, such as saving behaviors, debt choices, and responses to financial products.
44
45### Post-Keynesian Economics
46Post-Keynesian views on retail banking might emphasize the bank's role in managing liquidity preference and uncertainty, focusing on the importance of credit and its influence on economic cycles.
47
48### Austrian Economics
49Austrian economics might stress the role of individual choice and market entrepreneurship facilitated by retail banking, skeptical of central influence via monetary policy or regulations.
50
51### Development Economics
52In development economics, retail banking is pivotal in promoting financial inclusion, enabling small-scale entrepreneurship, and fostering socioeconomic development in underserved regions.
53
54### Monetarism
55Monetarist theory would examine how retail banking affects the money supply through instruments like deposits and loans, focusing on the control of inflation and monetary stability.
56
57## Comparative Analysis
58Retail banking vs. Wholesale Banking:
59- Scale of Transactions: Retail banking deals with smaller sums.
60- Customer Base: Retail banking serves the general public; wholesale banking serves large entities.
61- Services Provided: Retail banking offers products like personal loans, savings accounts, and credit cards; wholesale banking provides large-scale financing, corporate loans, and interbank transactions.
62
63## Case Studies
64- Successful adoption of mobile banking in Kenya (M-Pesa) and its impact on financial inclusion.
65- The post-2008 Financial Crisis reforms and their effects on the retail banking sector in the United States.
66  
67## Suggested Books for Further Studies
681. *Retail Banking: Business Transformation and Competitive Strategies for the Future* by A. Sasedharan
692. *The Economics of Money, Banking and Financial Markets* by Frederic S. Mishkin
703. *The Art of Better Retail Banking* by Hugh Croxford, Frank Abramson, Alex Jablonowski.
71
72## Related Terms with Definitions
73- **Microfinance**: Financial services including small loans, savings, insurance, and fund transfers for low-income individuals or groups who do not have access to traditional banking services.
74- **Credit Union**: A member-owned financial cooperative providing credit and other financial services to its members.
75- **Branch Banking**: The operation of retail bank services through multiple branches across different locations.
76- **Digital Banking**: Provision of banking services through digital platforms, enabling customers remote access and transaction capabilities.