Banking has a rich history, stretching back to ancient civilizations like Egypt. Initially, agricultural goods were stored in state-run granaries, complete with a system of records for deposits and withdrawals. Over time, this primitive form of banking evolved into something more complex. By the Middle Ages, money changers came into the picture, helping travelers swap currencies. Then came the Renaissance in Italy, where moneylenders operated from benches, or "banchi," in marketplaces.

This Italian banking model caught on, spreading rapidly throughout Europe. Particularly in Britain, goldsmiths took banking a step further by inventing fractional reserve banking. They issued more receipts for gold than they actually had, which amplified their ability to make profits. In the early United States, banks emerged as critical financial pillars, supporting the young nation's expansion. Eventually, the National Bank Act of 1863 established a national banking framework.

What exactly is a bank, then? Well, it's both a channel for moving funds from savers to borrowers and a corporate body established by shareholders. They're crucial for business activities because they manage payment systems, offer major sources of credit, and provide a safe place to keep deposits.

By the 1950s, retail banking emerged as banks began to see personal accounts as valuable sources of deposits. This led to fierce competition for these deposits, prompting banks to tailor products to certain customer groups and adopt aggressive marketing strategies. Around the 1960s, banks pivoted from focusing solely on their internal processes to placing greater emphasis on product quality and sales. By the 1980s, marketing had become an important strategic tool, especially as competition continued to heat up.

Fast forward to the 1990s, retail banking in some areas reached what's known as a "market control era." Marketing took the wheel in strategic planning, and banks started to actively meet customer demands with a focus on quality and service. The transition was from a bank-centric approach to one that was market-centric. Open competition meant banks had to compete not just on price but also on efficiency and risk-return profiles.

Through these periods, the relationship between banks and their customers evolved. In the earlier days, it was all about production, but by the 1980s, the focus had shifted to sales and marketing. We also saw the rise of partnerships between banks and insurance companies, known as allfinanz, and a trend toward financial convergence, thanks to deregulation. The strategic emphasis shifted from merely navigating regulations to thriving in a competitive environment.

So, what is retail banking today? It's banking that focuses on providing products like deposits, loans, credit cards, and other services to individual customers and small businesses. While retail banking is different from wholesale and investment banking, it's increasingly centered on building strong relationships with retail customers and solving their financial needs. As more and more banking products become similar, the overall customer experience is becoming a key point of difference.

In the modern landscape, retail banking is also defined by its use of multiple channels. Beyond traditional branches, services are offered via the internet and phones. Banks collaborate in areas like payments and consumers often use multiple banks for different needs. Banks now also compete across a range of financial products, not just in their traditional areas. Price sensitivity varies among customers and across different products, making the market dynamics complex and fascinating.