Consumer bank
Consumer bank (also called retail bank or personal bank) refers to a financial institution that provides banking services directly to individual customers rather than to corporations or other banks. These banks handle everyday financial needs. They accept deposits, issue credit cards, and provide personal loans and mortgages to the general public[1].
The distinction between consumer banking and wholesale banking became prominent during the 20th century as financial markets grew more complex. Today, major consumer banks like JPMorgan Chase, Bank of America, and Wells Fargo serve millions of customers across the United States, with JPMorgan Chase holding approximately 11.7% of total U.S. domestic deposits as of March 2024.
History and development
Consumer banking has roots that extend back centuries to early merchant banks and lending houses. Modern retail banking emerged in the 19th century when banks began systematically serving middle-class customers with savings accounts and small loans[2]. The Banking Act of 1933 (Glass-Steagall Act) in the United States created clear separations between commercial banking and investment banking activities.
Major changes occurred in the 1970s and 1980s. The introduction of automated teller machines (ATMs) transformed how customers accessed their funds. Citibank installed one of the first widely-used ATM networks in New York City in 1977. Deregulation during the Reagan administration allowed banks to expand services and compete across state lines.
The 2008 financial crisis reshaped consumer banking regulations significantly. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which created the Consumer Financial Protection Bureau (CFPB) to oversee retail banking practices. Senator Elizabeth Warren was instrumental in developing this agency, which opened officially in July 2011.
Types of consumer banks
Several categories of financial institutions provide consumer banking services:
- Commercial banks - For-profit institutions that offer comprehensive retail services. They generate income through interest rate spreads between deposits and loans, plus transaction fees. Examples include Chase, Bank of America, and Wells Fargo.
- Credit unions - Member-owned, not-for-profit cooperatives that typically offer lower fees and better interest rates. The first U.S. credit union was established in Manchester, New Hampshire in 1908.
- Community banks - Generally defined as institutions with less than 10 billion dollars in assets. These are privately and locally owned, focusing on relationship-based banking within specific geographic areas.
- Online banks - Digital-only institutions without physical branch networks. Ally Bank, founded in 2009, pioneered this model in the U.S.
Core services
Consumer banks provide several essential financial services to their customers[3]:
Deposit accounts form the foundation of retail banking relationships. Checking accounts allow customers to deposit and withdraw funds freely. Savings accounts pay interest on deposited funds while limiting withdrawal frequency. Certificates of deposit (CDs) offer higher interest rates in exchange for fixed-term commitments.
Consumer lending represents a major profit center. Personal loans, auto loans, and home mortgages help individuals finance large purchases. Credit cards combine lending with payment convenience. Interest rates on consumer loans typically range from 6 percent to 25 percent depending on creditworthiness and loan type.
Payment services have expanded dramatically with technology. Online bill payment, wire transfers, and mobile payment systems now complement traditional check-writing. Bank of America's AI assistant Erica served 35 million users as of March 2025, handling more than 200 million client requests each quarter.
Investment and insurance products are offered by many retail banks. These include brokerage accounts, retirement planning services, and various insurance policies sold through bank subsidiaries.
Revenue model
Consumer banks generate profits through multiple channels. The primary source is net interest income: the difference between interest earned on loans and interest paid on deposits. A bank might pay 0.5 percent on savings accounts while charging 7 percent on auto loans.
Fee income provides the second major revenue stream. Monthly account maintenance fees, overdraft charges, ATM usage fees, and credit card annual fees contribute significantly. Some banks collected over 30 billion dollars in overdraft fees annually before regulatory scrutiny increased.
Interchange fees from debit and credit card transactions add another income source. Each time a customer uses a card, the merchant pays a small percentage to the card-issuing bank.
Regulation and oversight
Consumer banks operate under extensive regulatory frameworks designed to protect depositors and maintain financial stability. The Federal Deposit Insurance Corporation (FDIC), established in 1933, insures deposits up to 250,000 dollars per depositor, per bank.
The Office of the Comptroller of the Currency (OCC) charters and supervises national banks. State banking departments regulate state-chartered institutions. The Federal Reserve oversees bank holding companies and monitors systemic risk across the banking system.
Consumer protection regulations have strengthened considerably. The Truth in Lending Act requires clear disclosure of loan terms. The Fair Credit Reporting Act governs how banks use consumer credit information. After the 2008 crisis, the CFPB gained authority to investigate and penalize unfair lending practices. The agency has returned more than 21 billion dollars to consumers who were defrauded by financial institutions since its founding.
Digital transformation
Technology has fundamentally altered consumer banking. Mobile banking apps now handle tasks that once required branch visits. JPMorgan Chase reported over 64 million active digital customers in early 2025, reflecting 8 percent year-over-year growth.
Artificial intelligence powers customer service chatbots and fraud detection systems. Machine learning algorithms assess creditworthiness and personalize product recommendations. These technologies reduce costs while improving service speed.
Branch networks continue to shrink. Traditional brick-and-mortar locations increasingly serve as advisory centers rather than transaction processing points. Many routine operations have migrated to digital channels completely.
Security challenges have grown alongside digital expansion. Banks invest billions annually in cybersecurity infrastructure to protect customer data and prevent unauthorized transactions.
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See also
References
- Federal Deposit Insurance Corporation (2024). Quarterly Banking Profile.
- Consumer Financial Protection Bureau (2024). Annual Report.
- JPMorgan Chase & Co. (2025). First Quarter Earnings Report.
- Mishkin, F.S. (2021). The Economics of Money, Banking, and Financial Markets. Pearson Education.
- Saunders, A., & Cornett, M. (2022). Financial Institutions Management: A Risk Management Approach. McGraw-Hill.
Footnotes
<references> [1] Retail banks are the primary access points to the financial services industry for typical consumers. [2] The evolution of retail banking has been radical, influenced by technological and social changes. [3] Services may be delivered through physical branches, smartphone apps, websites, or telephone. </references>