The Role of Retail Banking in the U.S. Banking Industry

The Role of Retail Banking in the 

U.S. Banking Industry: Risk, Return, and Industry Structure

1. Introduction

     The U.S. banking industry is experiencing renewed interest in retail banking. These activities—broadly defined as the range of products and services provided to consumers and small businesses—have grown in importance over the past several years. Retail-related positions now account for larger shares of commercial bank balance sheets, and the number of bank branches continues to grow. 

   The recent focus on retail contrasts sharply with industry views held during the 1990s, when banks’ attention turned to broadening products, diversifying revenues, substituting alternative delivery channels for branches, and offering a multitude of financial services to all types of retail, corporate, and wholesale customers.This “return to retail” is reflected in a greater number of media reports on retail banking activities, in the frequency with which retail banking activities have been mentioned in banks’ public statements, and in the attention given to these activities by industry analysts.1 A 2004 report by Standard and Poor’s—“Retail Sector Anchors Large Complex Banks in U.S.

In Their Own Words: How Banks Describe Their Retail Banking Activities

    These descriptions are from the 2005 annual reports of four large banks. This group certainly does not constitute an exhaustive list of institutions that provide detailed information on their retail banking activities. However, the passages cited here are representative of the information provided by large banking
organizations that identify distinct retail business segments in their annual reports.