Retail Banking vs Corporate Banking - RazorpayX Blog (2024)

Businesses have financial needs, too. They need to store money, avail loans and manage finances just like individuals.Regular retail banks provide financial services to individuals but are not equipped to service businesses.

Corporate banking provides businesses financial services like account holding, loans, capital, vendor management, and more. Corporate banking and retail banking might provide similar services but are vastly different.

Corporate Banking vs Retail Banking

Retail banks cater to the needs of individuals and the smallest businesses – providing savings accounts, deposits, and loans.

These banks are not made to manage the finances of a rapidly growing business or big corporations. Businesses have other needs that a commercial bank simply cannot anticipate or provide for. This creates the need for a branch of banking optimized for businesses: Corporate Banking.

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Retail Banking

Retail banks or retail banking provide financial services to individual consumers. They are the banks that we think about when we think of “banking”.

Most banks have a retail banking division and serve the general public with savings accounts, salary accounts, investment options and more.

Retail banks have features like mobile apps, online banking, physical branches, ATM and chequebook facilities that help individuals manage their finances as best possible.

Here are all the services that a retail bank offers:

1. Savings Accounts
2. Salary Accounts
3. Certificate of Deposite (CD)
4. Home, Automobile, Education Loans
5. Mortgages
6. Credit cards
7. Foreign currency and remittance
8. Recurring Deposit
9. Fixed Deposit
10. Insurance Services

And more. These services are tailor-made for the individual since individuals have very different financial needs when compared with businesses.

Individuals demand quick and secure banking services – we expect UPI or NEFT transactions to go through in minutes. They also demand ease of use and high levels of accessibility, which is why retail banks spend considerable resources in ensuring that their customer-facing platforms are UI/UX friendly.

Retail banks also have to ensure high levels of accessibility – most big retail banks have physical branches in as many locations as feasible. ICICI Bank, for example, has a brand presence in 5,275 locations in India and in 17 countries worldwide.

Corporate Banking

Corporates and organizations have very different demands and requirements from the regular individual.

Businesses make and receive hundreds, if not thousands of financial transactions on a day-to-day basis. They also need other features for the smooth running of business – corporate banking evolved as a sector to provide for these needs.

Corporate Banking serves businesses right from the startup stage – they provide capital, loans, funding and more to growing businesses. They also serve huge MNCs and and conglomerates which move money in the billions and crores.

While retail banking is the more widely-known dimension of banking, corporate banking is where the real money is. Most banks make profits from their corporate banking sector, thanks to the sheer amounts of money involved.

Corporate Banking Services

Current accounts

A current account is a platform where a business can send and receive money.

Current accounts allow businesses to send and receive money with no limit,and other features that businesses need for smooth functioning.

Credit Facilities

A business in its initial stages does not earn enough to cover costs. Even later in its lifetime, credit needs may arise. Corporate banking provides specially designed loans to help businesses with these funding requirements.

Different banks offer many different kinds of loans for businesses, but the most common are:

Working Capital Loans

Sometimes a business may not have cash on hand to pay for rent, raw materials, and other daily operations. Businesses that experience a sudden seasonal spike in demand especially have this issue.

Working capital loans provide financing for the daily operations of a business.

They are not used to finance the purchase of big assets or long-term investments.

Examples of working capital loans:

• Overdraft facility
• Cash credit facility

Term Loans

When an SME needs to purchase an asset but does not have the cash to do so, it can avail of a term loan.

Banks offer these loans under flexible repayment terms based on the business’s cash flows and financial condition.

However, these loans are not given easily – merchants must prove their creditworthiness and financial stability if they want approval for term loans.

Corporate Credit Card

Loans are significant commitments. They require collateral and demand interest rates that may not be within a business’ budget. In these cases, corporate banks provide companies with credit cards, tailor-made for corporate needs.

Corporate credit cards allow for much higher spending limits than personal credit cards and do not require personal guarantees or deposits of any kind – something that most personal credit cards do require.

RazorpayX’s Corporate Credit Card offers perks and benefits that would actually benefit a business: free credits on AWS, Google Workspace, Shopify, WeWork, and more!

Cash Management

Businesses have to deal with paying vendors, and employees, processing refunds, paying taxes and so much more. They also have to deal with a huge inflow of cash from revenue generation, interest earnings, and more.

Corporate banks have cash management services that allow merchants to make and receive these payments with ease.

Does my Business Need Corporate Banking?

Good founders anticipate growth. A growing business needs to have a solid bank to back it up, even in the initial stages. Relying on the services of commercial banks may serve well in the beginning, when growth is gradual. But when your business explodes, and you’re still relying on legacy retail banks…

This is why any smart business owner realizes the need for a good, reliable corporate bank to manage their money right from the start.

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