Car loans and loans for the purchase of other consumer items such as washing machines, motorbikes and televisions fall into the broad category of consumer finance. Banks compete with a number of non-bank institutions in this segment such as stores, auto manufacturers and specialist consumer finance firms.
Many banks subdivide the retail segment further in terms of their own organization into personal banking (mortgages, credit cards, overdrafts and other services) and consumer finance (auto loans and other loans to finance consumer purchases). In recent years there has been a move to base the retail banking organization more on the delivery method used, for example branch-based banking and products delivered electronically. This trend is likely to persist as more people use the Internet to search for the best terms available and to apply for loans.
Most retail loans are highly commoditized. Credit approval procedures are highly automated and pricing and approval decisions result from bank policy decisions rather than being made individually. Key success factors in this segment include access to customers, ease of application, speed of credit approval and pricing. For specialist lending services, such as loans to individuals with a poor credit record, collateral requirements may be lowered in return for a higher price.