All About Retail Banking: What It Is and How It Works

By Jacqueline DeMarco · June 14, 2022 · 7 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

All About Retail Banking: What It Is and How It Works

What is retail banking? Retail banking is simply banking services targeted at individual consumers instead of businesses.

Most adults are retail banking customers. There comes a day when all of us graduate from our piggy banks and move on to the real deal. Whether our parents take us to open our first savings account to stash all that birthday money from grandma or we realize we need a checking account to direct deposit our first paychecks, most of us switch over to retail banking at some point.

However, we often don’t really understand how banks work and how to choose the right financial partner for our day-to-day money moves. Ready to upgrade that info? Keep reading to learn more as we share:

•   What retail banking is

•   What types of banks are considered to be retail banks

•   What services retail banks offer.

What Is Retail Banking?

Most of us have experience with retail banks, though the name can be a bit confusing. That’s why some people prefer to refer to retail banks as personal banks. Retail banking provides banking services to individual consumers — not businesses. They offer the services and products we all need to manage our financial lives, such as:

•   Checking accounts

•   Savings accounts

•   Mortgages

•   Credit cards

•   Personal loans

•   Debit cards

How Does Retail Banking Work?

Let’s take a closer look at how retail banking works. There are three main types of retail banks. Credit unions, commercial banks, and investment funds that also offer retail banking services. These three types of retail banks all offer similar products and services. For instance, any one of them may provide checking and savings accounts, consumer loans, and credit and debit cards.

Bricks-and-mortar retail banks have multiple branches that offer in-person services and can provide services over the internet. Some retail banks are online only, meaning consumers can access their offerings online, via their website and app.

While retail banks are designed to provide support to consumers, some do offer services for small businesses.

Now, let’s consider what a retail bank account is. The term simply means a bank account held at a retail bank. Many people use the term “bank account” when talking about a checking account. A checking account is a type of deposit account held at a bank that keeps the account holder’s money safe, but accessible for spending. You can deposit funds and then spend your money via debit card, cash withdrawal, checks, and transfers.

Recommended: Checking Accounts vs. Savings Accounts: Differences to Know

How a Retail Bank Generates Income

Retail banks can make money in a few different ways. The two main ways they generate income is through transaction fees and interest rate spreads that come from their checking, saving, deposit, and loan services.

•   Transaction fees can include recurring charges on credit cards and fees associated with transfers.

•   The interest rate spread represents the difference in interest rates that banks pay on deposit accounts (like savings accounts) vs what they charge on loans. The wider that spread, or difference, the more they make.

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Types of Retail Banks

As we briefly mentioned, there are three main types of retail banks including commercial banks, credit unions, and investment funds that offer retail banking services. Because most consumers are going to manage their banking through a commercial bank or credit union, not an investment fund, let’s delve into those two options.

•   Commercial banks tend to offer a wide range of consumer banking services like checking accounts, savings accounts, debit cards, credit cards, certificates of deposit (CDs), and loans. Commercial banks are for-profit institutions that tend to generate most of their income through transaction fees and interest rate spreads. When looking at commercial banking options, you will probably notice that online banks tend to offer higher interest rates and charge fewer and lower fees than traditional, bricks-and-mortar banks. Because they lack physical locations, they can pass savings along to their customers.

•   Credit unions, on the other hand, are not-for-profit institutions. The depositors are shareholders of the credit union. Often, credit unions function on a smaller scale than retail banks. They also tend to face less pressure than commercial banks do to generate profits. Because of this, they usually offer lower interest rates on loans and give higher interest rates on deposit accounts. They also don’t typically charge high fees.

While credit unions have a lot of advantages when it comes to finding lower fees, loan rates and earning higher interest rates, they tend to be less tech-savvy than larger banks. Some people will find this tradeoff worth it, however.

Recommended: APY vs. Interest Rate: What’s the Difference?

Features of Retail Banking

Retail banking delivers the hub of your basic, necessary financial transactions. It spares you carrying around or hiding stacks of money as you go through daily life. Retail banking provides a safe place to deposit your income and a secure way to pay bills and save for a variety of goals, whether that means a summer rental by the beach or a down payment for a home.

As briefly noted above, the features of retail banking can include:

•   Checking accounts

•   Savings accounts

•   Mortgages

•   Credit cards

•   Debit cards

•   Personal loans

All of these services can power your personal finances.

Costs of Retail Banking

The cost of retail banking falls on the consumer: You pay transaction fees and interest rates paid on lending products. For example, a customer may pay a retail bank interest on a mortgage loan every month or pay a late fee and interest on a credit card balance if they fail to make a payment one month. Some banks charge monthly account fees, minimum balance fees, overdraft charges, and more. This varies bank to bank, so read the fine print or check in with a customer service representative to know what you are getting into before opening an account.

Differences Between Retail and Corporate Banking

Corporate banks serve a different customer than retail banks do. Corporate banking is designed to offer a variety of banking services to corporations. Corporate banks can offer services and the provision of credit and cash management facilities.

Let’s quickly compare and contrast retail banks and corporate banks.

Retail Banks vs Corporate Banks
Retail BankCorporate Bank
Clientele: ConsumersClientele: Small to middle-sized businesses and large conglomerates
Services: Consumer financial services such as checking, savings, loans, debit, and credit cardsServices: Business finance services such as as offering cash management facilities
Authority: ConsumerAuthority: Company board of directors
Bankers: Consumer bankersBankers: Business bankers

Alternatives to Retail Banking

Consumers don’t have much in the way of alternatives to retail banks. There are fintech companies that can’t be called a bank but offer some of the services that retail banks do. And we’d probably all agree that keeping your money under the mattress isn’t a good idea. So if you want to run your financial life, a retail bank is probably in your future.

While small business owners may start their entrepreneurial journey by managing their finances at a retail bank, they may need to eventually make the switch to a corporate bank.

The Takeaway

Most of us bank at a retail bank whether we realize it or not; it’s just a term that describes the “regular bank” at which we consumers keep our money. Whether you use a bricks-and-mortar bank, online bank, or credit union, retail banks offer helpful products to consumers looking to manage their financial lives. You can open a savings or checking account, apply for a debit or credit card, or take out certain consumer loans. They are what allow people to safely store their money, pay bills, transfer funds, and save to make their financial dreams come true.

Looking for a new bank? SoFi’s online banking app offers automatic savings features, no account or overdraft fees, up to 15% cashback when using the SoFi debit card at local establishments, and a competitive APY.

Learn more about what SoFi Banking has to offer today!


What is the meaning of retail banking?

The term “retail banking” essentially refers to typical consumer banks where people can manage their checking and savings accounts, apply for loans, and secure financial tools like debit and credit cards.

What are the types of retail banking?

There are three main types of retail banks. Commercial banks, credit unions, and investment funds that offer retail banking services are all considered retail banks. Commercial banks, whether bricks-and-mortar or online, are for-profit institutions, whereas credit unions are not-for-profit institutions.

What is the difference between personal banking and retail banking?

There is no difference between personal banking and retail banking. The terms “personal banking” and “retail banking” mean the same thing.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

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