What is Banking of Individuals? Definition, Meaning and Concept
Private banking is the commercial banking sector, or the unit of a credit institution, specialized in users who carry out low-amount transactions with high frequency. That is, it is the area that mainly serves natural persons.
This segment is also known as retail banking or retail banking. Unlike wholesale banking, its operations commit small amounts and do not target large clients.
Furthermore, in contrast to corporate banking, private banking does not finance profit-making or commercial activities. It focuses more on personal and mortgage credit.
Individual banking products and services
The main products and services offered by private banking are the following:
- Savings options: Financial entities give their clients the option of opening a bank account. Money is deposited in it, indefinitely or for a specified period, in exchange for a payment. Said remuneration is calculated by multiplying the interest rate for the period by the amount of money committed.
The savings accounts are also linked to debit cards that allow the user to perform their daily transactions, which is a great advantage because it avoids the risk of handling cash (theft, loss, etc).
- Loans : They facilitate the purchase of a good or service with future payment and even in installments, depending on the case. Within this category fall, for example, mortgages and credit cards.
Classification of individual banking
The financial institutions can distinguish within different private banking subsectors:
- The bank where the most common operations are carried out such as the deposit of wages, transfers and direct debits are carried out. The latter refers to the automation of payments. Thus, a customer can order, for example, that a certain amount be deducted from their savings every month to cancel the receipt of telephone service.
- Another segment is aimed at high net worth individuals. They receive services such as investment management advice. The financial institution offers them personalized attention and benefits such as a greater line of credit.
- Another area of individual banking focuses on small and medium-sized companies ( SMEs ), mainly offering financing and advice. The billing limit to be considered a client within this category depends on the regulations of each country.