Types of Bank Customers

A bank customer can be defined as any legal entity like individuals or firms which interacts with and uses the bank’s facilities. We look at the types of bank customers based on these three criteria: the type of legal entity, size of business, and the type of account.

Who are the customers of banking services?

People from all walks of life require banking services. In fact, most of us cannot imagine a world without banks. Most of the larger transactions today, take place electronically. Banks form intermediaries between different parties. At the same time, banking services like money keeping, borrowing, and lending are used universally. This brings us to the question that what are the different types of people who use these services?

We can define the customers based on many different criteria:

1. Type of legal entity
2. Size of business
3. Types of account

Now let us look at each one of these, one by one:

Type of legal entity

A legal entity is something that has an independent existence in the eye of law. We may have different entities that take the use of banking services. Therefore, they become a bank’s customers. Here are some examples:

1. Individuals
2. Firms (such as a partnership, company or proprietorship)
3. Government
4. Bodies such as NGOs, Societies, etc

As we can see that each of these types of banking customers may have very different needs. An individual operating a savings account will be interested in getting her/his salary credited to their account and using the same to meet day-to-day expenses. On the other hand, a partnership firm that holds a current account with the bank may be happy when they receive a higher overdraft facility for their account.

Similarly, the other two types of customers may have their own sets of expectations. A government may have different accounts for each department or unit for various needs. Similarly, entities like NGOs and societies also need to store money safely. They may also need a line of credit from time to time. Therefore, they are also an important type of customer for the bank.

Size of business

We may also categorize the customers through the size of the business. This kind of categorization is important. It helps the bank in segmentation. Further, this segmentation helps the banks in developing their marketing mix.

Usually, the most useful types of bank customers banks are larger firms and rich individuals. These types of customers have a higher average account balance. This provides the necessary cash for the banks to survive. Such customers may also be sources of revenue through secured/unsecured loans. A bank may have dedicated relationship managers assigned to handle such customers.

On the other hand, we have retail customers. These customers have smaller transactions and smaller balances individually. However, on an aggregate level, they form a bulk of business for the entire banking industry.

Bank accounts for specific customer segments

Another strategy is to provide bank accounts that cater to specific demographics or types of bank customers. It is imperative that certain customer segments will have a different need than others. For example, senior citizens may have a lot of cash savings to keep in the bank with little liabilities. On the other hand, youth may have less cash but are heavy on liability.

Therefore banks may create accounts for special segments. For instance, one of the large private banks in India, Axis Bank offers these types of savings accounts:

1. Youth account
2. Women account
3. Children Account
4. Senior Citizen account
5. Digital Account

Types of accounts

Banks may also have different categories of accounts for the specific needs of the customers. The naming convention and the specific modalities may change from one country to another. However, all the banks have some specific categories of account types. Some of these are:

1. Savings account – this is the most common type of bank account. It is commonly used by different types of customers. It is the same as Sparkasse(Germany).
2. Checking account(USA) or Chequing account, Current account(India, UK), or Demand deposit account. It is also known as Girokonto(Germany).
3. Trading account or brokerage account. A brokerage account allows you to trade in stocks. Sometimes the account may allow delivery of stocks as well. Most modern exchanges use a digital form of stock delivery hence such accounts are called dematerialized accounts. The short form is a Demat account.
4. Forex account or Money market account. Customers who wish to trade in currency may opt for a forex account. The bank may allow forex customers heavy leverage. It helps the customers in holding bigger positions in the money market.
5. A retirement account is another type of bank offerings. Usually, these accounts help the customers in saving up for retirement. The rate of return is higher than the regular deposit account.

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