What is a Consumer Bank?

A consumer bank is any bank that accepts deposits, offers services like making private loans to individuals, and allows you person-to-person contact at a specific location, called a branch. Essentially any bank you walk into to deposit your paycheck is a consumer bank. The term refers to the fact that the bank has a physical location or branch, and to the fact that it serves individual customers. Serving individuals instead of businesses can also be called retail banking.

The consumer bank is actually a relatively new phenomenon in the history of banking. Most banks were initially built to serve businesses and countries. They weren’t examples of a consumer bank, since they didn’t normally provide services to individuals, unless you were extremely wealthy and your deposits financed some aspects of the bank’s business endeavors. It wasn’t until about the mid 1800s that banks started seeing the value of offering accounts and safe depositing places for the average person.

Private individuals often didn’t help matters. They were wary of placing their money into the hands of others, and feared what would happen if the bank failed. Such events did occur from time to time, and some people hid their money or even “stuffed mattresses” instead, to avoid giving their money into someone else’s care.

Several consumer bank types evolved, such as credit unions and savings and loan companies. Some people particularly preferred credit unions, since they were “owned” to a degree by the people who deposited money into them. Anyone familiar with the classic Christmas movie It’s a Wonderful Life, is likely to remember the scene where there is a run on George Bailey’s Building and Loan and the local town bank. As George Bailey attempts to explain to the people worried about their money, it’s invested throughout the town in loans to other people, but some people still demand their money, costing George and his wife their honeymoon.

For a long time, fear of the consumer bank existed for people because there was no guarantee that if the bank collapsed you’d ever see your money again. This is no longer the case for most consumer bank types of today. Most in the US carry insurance on your deposits, from the Federal Deposit Insurance Corporation (FDIC). When the FDIC backs a consumer bank, up to $100,000 US Dollars of your money is insured should the bank collapse. As financial experts warn, if you have more than this amount, it is better to have no more than this insured amount in any one bank.

In recent years, with the development of so many different ways of banking, via the Internet, ATMs, and telephones for instance, many retail bank branches have closed. This can be irritating for people when they do need to talk to an actual person or conduct banking business that can only occur in person. Some banks, though, have noticed that not all customers are pleased when branches close, and have invested money in opening more branches so that customers have more options as to how to conduct their banking.