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The main difference between retail vs. corporate banking lies in what type of services they provide and to whom. Retail banking is consumer-focused while corporate banking, also referred to as business banking, is designed to meet the needs of businesses.

Banks can offer both retail and business banking services to attract both types of clients. Understanding how each one works makes it easier to distinguish between retail vs. corporate banking.

What Is Retail Banking?

Retail banking refers to banking services and products offered to retail customers, meaning individuals. Retail banking can also be referred to as consumer banking or personal banking. The kinds of products and services offered by retail banks are designed for personal money management — such as checking and savings accounts, certificates of deposit (CDs), debit cards, and more.

In the U.S., the Office of the Comptroller of the Currency (OCC) is responsible for overseeing banks at the national level. Banks with assets in excess of $10 billion are also regulated by the Consumer Financial Protection Bureau (CFPB). In addition to federal regulation, retail banks can also be subject to regulation and oversight at the state level. These organizations help ensure that services are being provided in keeping with the law and that charges are not excessive.

Recommended: How Do Retail Banks Make Money?

Services Offered Under Retail Banking

Retail banks typically offer products and services that are designed to help everyday people manage their finances. This is the key distinguishing factor between retail vs. business banking. For example, some of the services retail banks may offer include:

•   Deposit account services: Retail banks can allow consumers to open checking accounts, savings accounts, money market accounts, and other deposit accounts to hold their money safely and securely.

•   Mortgage lending: Homeowners often require a loan to purchase a home, and many retail banks provide mortgages to qualified borrowers.

•   Secured and unsecured loans: In addition to home loans, retail banks can issue other types of loans, including auto loans, personal loans, home equity loans, and lines of credit.

•   Credit cards: Credit cards offer convenience for making purchases; many of them also offer rewards to consumers for using them. Retail banks may issue credit cards to creditworthy customers.

•   Certificates of deposit: Certificates of deposit (or CD accounts) are special types of deposit accounts that allow you to earn interest on your money for a set term.

Banks may also offer insurance to their retail clients. Private banking may also be available for higher net-worth customers.

Retail banks usually make money by accruing interest on the money they lend via loans and other vehicles. They may also charge various fees for banking services, including overdraft fees, loan origination fees, and checking account fees. Some retail banks have physical branches, while others operate exclusively online.

What Is Corporate Banking?

Corporate banking is the branch of banking that offers its services and products to business entities. That includes large corporations as well as small and medium-sized business operations. Corporate banks may also serve government agencies and entities. While services may include deposit accounts, these banks also may offer credit and asset management, lines of credit, payment processing, and tools that facilitate international trade.

Like retail banks, corporate banks can charge fees for the various services they provide. Banking services can be directed toward a corporate audience in general or be tailored to target the needs of specific industries, such as healthcare or companies that operate in the tech space.

Recommended: When Would I Need a Business Bank Account?

Services Offered Under Corporate Banking

The services offered by corporate banks are designed to suit the needs of businesses large and small. The kinds of services a corporate bank can offer include:

•   Deposit account: Business banking can include many of the same deposit options as retail banking, such as checking accounts, savings accounts, and money market accounts.

•   Debt financing: Corporate banks can offer debt financing options to startups and established businesses that need capital to fund expansion projects and growth.

•   Trade lines of credit: Trade financing can make it easier for businesses to cover day-to-day operating expenses. Examples of trade financing that corporate banks may offer include merchant cash advances, purchase order financing, and accounts receivable processing.

•   Payments processing: Corporate banks can act as payment processors to help businesses complete financial transactions when providing products or services to their customers.

•   Treasury management: Treasury management services can help businesses keep cash flowing steadily and smoothly.

•   Global banking: Businesses that are interested in expanding into foreign markets may rely on business banking services to reach their goal.

Key Differences Between Retail and Corporate Banking

Retail and corporate banking both have the same goal: serving the needs of their customers. But the way they achieve this goal differs. Here are some of the most noteworthy differences between retail banking vs. business banking.

Business Model

Retail banking’s business model is built around meeting the needs of retail banking clients. Banks that operate in the retail space are primarily concerned with three things: deposits, money management, and consumer credit.

Corporate banks, on the other hand, base their business models around products and services that are utilized by business entities. That includes offering business bank accounts, providing avenues for securing capital, and offering financial advice.

Customer Base

Retail banks are geared toward consumers who rely on financial products like personal checking accounts, savings accounts, or unsecured loans. A retail bank can offer accounts to different types of consumers, including specialized accounts for kids, teens, students, or seniors. But generally, they’re consumer-facing and work with everyday people to help them manage their money.

That’s a difference between retail vs. corporate banking: The latter is business-centric. For example, a corporate bank may offer services to companies with a valuation in the millions. Or it may cater to smaller businesses that need help with things like payment processing or cash flow management. Some business banks may serve companies both large and small.

Processing Costs

As mentioned, both retail and corporate banks can charge fees for the services they provide. These fees are designed to make up for the bank’s own handling costs for processing transactions. Both types of banks can also charge interest on loans, lines of credit, and credit cards. These are some of the ways that banks earn money.

In general, retail banks tend to have lower handling costs which means lower fees for consumers. Corporate banks, on the other hand, typically have higher processing costs which means their clients pay more for their products and services.

Value of Transactions

Since retail banks serve everyday consumers, the average value of transactions processed tends to be lower compared to that of corporate banks. A corporate bank, for example, might process a transaction valued at several million dollars for a single customer. Someone who’s adding money to their personal checking account vs. a business checking account, meanwhile, may be depositing a few hundred or few thousand dollars.

Profitability

Here’s another key difference between business banking vs. retail banking: Business banking tends to generate more profits. That’s because corporate banks typically deal in higher value transactions than retail banks.

The Takeaway

The difference between retail vs. business banking is quite straightforward: Retail banking serves individual customers’ needs, while corporate banking serves the needs of companies of all sizes, as well as other organizations.

For most people, retail banking is a good choice to manage and optimize their financial lives. For instance, you can use a retail bank account to pay bills, deposit your paychecks, transfer money to savings, and make purchases or withdrawals using your debit card.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is corporate banking better than retail?

Corporate banking is not necessarily better than retail banking; they’re designed to serve different audiences. Corporate banking is usually a wise choice for a business entity, while retail banking is designed to serve individuals with their personal banking needs.

Is a current account retail or corporate?

Current accounts can be offered by retail and corporate banks. Generally speaking, a current account is a bank account that allows you to make deposits and withdrawals. A checking account, either personal or business, is an example of a current account.

Why do banks focus on retail banking?

Banks focus on retail banking because there’s a need for it among consumers; many adults might be interested in a checking account, a debit card, and a credit card, for example. The demand for retail banking also allows banks to generate revenue by charging fees for deposit accounts and interest on loans and lines of credit. That said, corporate banking also serves an important need and generates income for banks as well.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

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The bull put credit spread, also referred to as bull put spread or short put credit spread, is an options trading strategy designed to benefit from moderately bullish market sentiment.

In a bull put credit spread, an investor buys one put option and sells another at a higher price. Each put option has the same underlying security and the same expiration date, but a different strike (exercise) price. The strategy has limited upside and downside potential.

Investors employing a bull put credit spread receive a net credit from the difference in option premiums. The strategy seeks to profit from a modest increase in price of the underlying asset before the expiration date. The trade will also benefit primarily from time decay and, to a lesser extent, from a decline in implied volatility.

How a Bull Put Credit Spread Works

In a bull put credit spread, the investor uses put options. Put options give the buyer the right – but not the obligation – to sell a security at a specified price during a set period of time. They’re typically used by investors who believe the price of an underlying security will go down.

In a bull credit spread, however, the strategy is structured for investors who expect the underlying stock’s price to rise or remain above a certain level before the option expires.

To construct a bull put credit spread, a trader sells a put option at a given strike price and expiration date, receiving the premium (a credit) for the sale. This option is known as the short leg because the trader sells it, collecting a premium upfront.

At the same time, the trader buys a put option at a lower strike price, paying a premium. This option is called the long leg. The premium for the long leg put option will always be less than the short leg, since the lower strike put is further out-of-the money. Thus, the trader receives a net credit for setting up the trade.

The difference between the strike prices of the two sets of options is known as the “spread,” giving the strategy its name. The “credit” in the name comes from the fact that the trader receives a net premium upfront.

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Profiting from a Bull Put Credit Spread

In a properly executed bull put credit spread strategy, as long as the value of the underlying security remains above a certain level, the strategy can produce a profit as the difference in value between the two sets of options diminish. This reduction in the “spread” between the two put options reflects time decay, a dynamic by which the value of an options contract declines as that contract grows closer to its expiration date.

The “bull” in the name of this strategy reflects the investor’s expectation that the value of the underlying security will remain above the short put strike price before the option expires. Although higher asset prices may improve the probability of maximum profit, the potential gain is capped at the net credit received. If the price of the underlying security drops under the long-put strike price, then the options trader can lose money on the strategy.

Recommended: How to Trade Options

Maximum Gain, Loss, and Break-Even of a Bull Put Credit Spread

Investors in a bull put credit spread strategy make money when the value of the underlying security of the options goes up, but the trade comes with limited loss and gain potential. The short put gives the investor a credit, but caps the potential upside of the trade. And the purpose of the long put position — which the investor purchases — protects against loss.

The maximum gain on a bull put credit spread will be obtained when the price of the underlying security remains at or above the higher strike price of the short put. In this case, both put options are out-of-the-money, and expire worthless, so the trader keeps the full net premium received when the trade was initiated.

The maximum loss will be reached when the price of the underlying security falls below the strike price of the long put (lower strike). Both put options would be in-the-money, and the loss (at expiration) will be equal to the spread (the difference in the two strike prices) less the net premium received.

The breakeven point for the strategy is calculated by subtracting the net premium received upfront from the strike price of the short put. This represents the price level at which the investor neither gains or loses money.

Example of a Bull Put Credit Spread

Here’s an example of how trading a bull put credit spread can work:

Let’s say a qualified investor thinks that the price of a stock may increase modestly or hold at its current price of $50 in the next 30 days. They choose to initiate a bull put credit spread.

The investor sells a put option with a strike price of $50 for a premium of $3, and buys a put option with a strike price of $45 for a premium of $1, both expiring in 30 days. They earn a net credit of $2 — the difference in premiums. And because one options contract controls 100 shares of the underlying asset, the total credit received would be $200.

Scenario 1: Maximum Profit

The best case scenario for the investor is that the price of the stock is at or above $50 on expiration day. Both put options expire worthless, and the maximum profit is reached. Their total gain is $200, equal to $3 – $1 = $2 x 100 shares, less any commissions and fees. Once the price of the stock is above $50, the higher strike price, the trade ceases to gain additional profit.

Scenario 2: Maximum Loss

The worst case scenario for the investor is that the price of the stock is below $45 on expiration day, resulting in both options being in-the-money. The maximum loss would be reached, which is $300, plus any commissions and fees. That’s because $500 ($50 – $45 x 100) minus the $200 net credit received is $300. Once the price of the stock is below $45, the trade ceases to lose any more money.

Scenario 3: Breakeven

Suppose that on expiration day, the stock trades at $48. The long put, with a strike of $45, is out-of-the-money, and expires worthless, but the short put is in-the-money by $2. The loss on this option is equal to $200 ($2 x 100 shares), which is offset by the $200 credit received. The trader breaks even, as the profit and loss net out to $0.

Related Strategies: Bear Put Debit Spread

The opposite of the bull put credit spread is the bear put debit spread, also known as a debit put spread or bear put spread. In a bear put spread, the investor buys a put option at one strike price and sells a put option at a lower strike price — essentially swapping the order of the bull put credit spread. While this sounds similar to the bull put spread, the construction of the bear put spread results in two key differences.

First, the bear put spread, as its name implies, represents a “bearish” bet on the underlying security. The trade will tend to profit if the price of the underlying asset declines.

Second, the bear put spread is a “debit” transaction — the trader will pay a net premium to enter it, since the premium for the long leg (the higher strike price option) will be more than the premium for the short leg (the lower strike price option).

Bull Put Credit Spread Pros and Cons

There are benefits and drawbacks to using bull put credit spreads when investing.

Pros

Here are some of the key advantages to using a bull put credit spread:

•   Potential losses (as well as rewards) are limited when the price moves in an adverse direction; an investor can determine their maximum potential loss upfront.

•   The inevitable time decay of options improves the probability that the trade will be profitable.

•   Bull put credit spread traders can still make a profit even if the underlying stock price drops slightly, as long as it remains above the breakeven point.

Cons

In addition to the benefits, there are also some disadvantages to be aware of when considering a bull put strategy.

•   The profit potential in a put credit spread is limited compared to outright stock purchases, as the strategy focuses on generating income rather than capital appreciation.

•   On average, the maximum loss in the strategy is larger than the maximum gain.

•   Options strategies are more complicated than some other forms of investing, making it difficult for beginner investors to engage.

The Takeaway

Bull put credit spreads are bullish options trading strategies, where an investor sells one put option and buys another with a lower strike price. That investor can make money when the value of the underlying security of the options goes up, but the trade comes with limited loss and gain potential.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

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