Wholesale banking is commonly defined as banking services that are provided between merchant banks and other types of financial institutions. The term is often used, however, to refer to the wide range of financial services that are provided by financial institutions to various corporations and businesses as well as to government entities. Wholesale banking is different from retail banking because it focuses more on corporate-style entities and high-value transactions, and retail banking focuses on providing financial services to individual consumers. Many banks typically engage in both wholesale and retail banking.
The task of providing a broad range of services to large corporations, mid-sized companies and small businesses is part of wholesale banking. Often, a financial institution will provide these services at discounted rates based on the number of services included in the package. This approach makes it more attractive for a company to place all financial matters with a single institution rather than using different banks and agencies for each banking service that the business needs to function.
This type of banking also is an option that is open for real estate developers, market investors and other businesses that operate in the buying and selling of properties and other forms of investment. The advantage of wholesale banking in this application is the easy access to the total financial portfolio, which makes transfers between accounts much simpler. It also includes features that allow for efficient transfers of stock ownership, funds and other financial instruments between financial institutions.
The scope of wholesale banking packages that are extended to businesses and governmental entities can include a range of other financial services as well. Discounted interest rates are commonly included as part of the incentive for entering into a wholesale finance arrangement. Many valuable support services, such as consultation on investments, help with the details of a merger or acquisition and various underwriting services, are often included with wholesale banking support.