What is 'Relationship Banking'

Relationship banking is a strategy used by banks to enhance their profitability. They accomplish this by cross-selling financial products and services to strengthen their relationships with customers and increase customer loyalty. Relationship banking involves offering customers a broad array of financial products and services that go beyond simple checking and savings accounts.

In addition to these two basic products, relationship-banking products may include certificates of deposit, safe deposit boxes, insurance, investments, credit cards, loans and business services (e.g., credit card processing). They may also include specialized financial products designed for specific demographics, such as students, seniors or the wealthy.

BREAKING DOWN 'Relationship Banking'

Customers may be able to take advantage of banks' desire to develop relationship banking to obtain more favorable terms or treatment with regard to some banking products as well as to obtain a higher level of customer service. However, federal anti-tying laws established by the Bank Holding Company Act Amendments of 1970 prevent banks from making the provision of one product or service contingent on another (with some exceptions).

RELATED TERMS
  1. Relationship Management

    A strategy employed by an organization in which a continuous ...
  2. Open Banking

    Open Banking is a system that provides a user with a network ...
  3. Limited Service Bank

    Any type of banking business facility that is located separately ...
  4. Relationship Manager

    A professional who works to improve a firm's relationships with ...
  5. Customer

    An individual or business that purchases the goods or services ...
  6. Commercial Bank

    A financial institution that provides services, such as accepting ...
Related Articles
  1. Small Business

    What Does a Relationship Manager Do?

    A firm’s relationship manager works to maintain positive relationships with its customers and partner firms.
  2. Personal Finance

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  3. Insights

    How Online Banking Is Overtaking Traditional Banking

    Is traditional banking doomed to be surpassed by online banking?
  4. Personal Finance

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  5. Managing Wealth

    Is Your Bank Pushing You Into the Wrong Products?

    Recent reports of questionable selling practices at J.P. Morgan Chase & Co. underscore the need for banking customers to be vigilant.
  6. Small Business

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  7. Personal Finance

    Choose To Beat The Bank

    From internet banking to credit unions, it's in your power to cut fees and maximize service.
  8. Tech

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against those of their brick-and-mortar peers.
  9. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
RELATED FAQS
  1. How do commercial banks make money?

    Learn the different ways commercial banks make money, including interest from loan products and banking fees charged to customers. Read Answer >>
  2. What are the differences between preference shares and bonds?

    Learn what information banks keep on file for their customers, and understand how this information can be used to deny an ... Read Answer >>
  3. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ... Read Answer >>
  4. How does a merger affect the customer?

    Learn how a merger may affect customers of the industry. The effects of mergers may be positive or negative, but there's ... Read Answer >>
  5. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  6. What distinguishes the financial services sector from the banks?

    Learn about the difference between the banking industry and the financial services sector and how to distinguish financial ... Read Answer >>
Hot Definitions
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  2. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  4. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center