Private banking is the commercial banking sector , or the unit of a credit institution , specialized in users who carry out low-value transactions with high frequency. That is, it is the area that primarily caters for natural persons.
This segment is also known as retail banking or retail banking. Unlike wholesale banking , its operations compromise small amounts and do not target large customers.
In addition, as opposed to corporate banking, private banking does not finance lucrative or commercial activities. It focuses more on personal and mortgage credit .
Products and services of private banking
The main products and services offered by private banking are the following:
- Savings options:Financial institutions give their customers the option of opening a bank account. Money is deposited in it , for an indefinite period or for a specific term, 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 payment in the future and even in installments, depending on the case. Within this category fall, for example, mortgages and credit cards .
Classification of private banking
The financial institutions can distinguish within different private banking subsectors:
- The bankwhere the most common operations are carried out such as the deposit of salaries , transfers and direct debits . The latter refers to payment automation. Thus, a customer can order, for example, that a certain amount be deducted from their savings every month to cancel the receipt of the telephone service.
- Another segment is aimed at individuals with high assets. They receive services as advice on investment management. The financial institutionprovides personalized attention and benefits as a greater line of credit .
- Another area of private banking focuses on small and medium enterprises ( SMEs), mainly offering financing and advice. The billing limit to be considered a customer within this category depends on the regulation of each country.