10 Different Types of Banks Common in the 21st Century

Lets look at the most common types of bank in United States, UK, Canada, Australia, and around the world. Learn about different types of banks and see which one you need for your personal or business needs. For those people planning to open a bank account for their businesses, personal checking account purposes, it’s important for them to be aware of the different types of banks to do business with. If you are looking to get a loan from a bank, it is your best bet to know the type of bank you are dealing with.

It is worthy to note that the banking industry is full of opportunities, but it can be a complicated place. Therefore, there’s need for thorough research before you begin. But first take a look at our previous posts below;

10 Bank Types to Know About for Personal and Business Needs

  1. Retail Banks
  2. Commercial Banks
  3. Investment Banks
  4. Credit Unions
  5. Private Banks
  6. Online Banks
  7. Savings and Loan Banks
  8. Shadow Banks
  9. Neobanks
  10. Challenger Banks

There are different types of banks and other financial institutions that function differently. Most of them offer different services, as well as providing different benefits/interests.

The main aim of this article, is to give you a wider view of different types of banks across the country. As we progress, we will go deep into each bank type, stating their advantages as well as their disadvantages. Furthermore, we will also be analysing their benefits and key functions. Now, let’s begin. 

1. Retail Banks

Retail banks are very popular type of bank. They are mainly used by singular individuals and small businesses. Whenever you think of local banking, then it is most likely a retail bank. These banks includes Chase Bank, PNC, Zenith, Guarantee Trust Bank, Bank of America etc are common examples of retail banks. Notwithstanding, these financial institutions also serves as commercial banking purposes. However, these banks are either very small, local banks or national banks with branches all over the country.

In the first place, all retail banks are usually known as “consumer banks” simply because most American consumers use retail banks to carry out their day to day financial transactions. All these type of banks can facilitate almost all a single individual would need from a financial institution. These needs ranges from, daily transactions to personal or business loans and certain brokerage services.

These are some of the services offered by retail banks:

Bank Accounts:

The retailing banks are mostly ideal for creating checking and savings accounts for single users. Financial account balance / minimums are relatively low, as well as the required initial deposits. In this type of banking, there are few bank charges associated with these accounts, as long as you don’t overdraft but meet the account minimum balance.


If you want a personal loan, a retail bank is your final destination to get it. However, every single bank have different policies in terms of interest and repayment. Additionally, you can even get auto/car loans and home equity loans depending on the bank and your credit history with them. Check out the List of Best Personal Loans Companies.

Debit Cards:

The issues you with a debit cards for financial transactions. It is provided as a complimentary item with your bank account to help facilitate fast transactions.

Credit Cards:

Do you require a credit card? You can also apply to open a credit card for your bank account but this is optional. However, the basic requirements for opening a line of credit depend on the bank. Also it usually involve your account balance, deposit frequency, as well as credit history. Look at the Simple Guide on How Cash Back Credit Card Works.

Money orders and certified checks:

  • These can also be made at retail banks.


Globally, all retail banks will have ATM locations for transactions in most towns and cities. These Automated Teller Machines are specifically designed for customers of that bank and carry no fees when transferring money through them.

Wire Transfers:

Mobile Money can be quickly transferred online from one account to another within the same bank. All these bank wire transfers are often completely free & will take effect instantly.

Certificates of Deposit:

  • This can also be issued from retail banks.

Specialized Accounts:

In summary, retail banks are typically capable of making specialized accounts for different types of people. Lastly, parents can as well open teen-checking accounts for minors, and there are specially designed accounts for high school & college students as well.

Notary services:

  • First, they can also be facilitated through these banks.
  • Retail banks are ideal for those looking for a convenient personal banking solution.
  • Retail banks make it easy for consumers to open accounts, maintain them, and interact with their money.

2. Commercial Banks

The commercial bank is the next type of bank we will take about. All the banks in this list below are specifically designed for business primarily. But individual consumers can also bank with a commercial institution if they wish. The list below falls under the commercial banking umbrella;

  • JP Morgan Chase & Co.
  • Wells Fargo
  • Citigroup Inc
  • U.S. Bancorp all

There are several other commercial banks in different country apart from the US. In any case, commercial banks all over the world give small to medium-scale businesses access to basic banking services. When you compare commercial banks to retail banks, you will notice that the commercial banks is more expensive.

That is to say they carry a few more bank charge and expenses. But in the second place, they offer more financial services and products its customers. Generally, the economic purpose of opening a commercial bank account is to create capital, credit, and foster liquidity in the capital market. These are the Major Differences Between a Commercial Bank and Credit Union.

Commercial Bank Services

Written below are some of the products and services offered by commercial banks:

  • Various Loans: First and foremost, commercial banks can provide many different types of loans for different purposes. These loans may include business term loans, commercial lending options, commercial mortgages plus refinancing purposes.
  • Cash Management Services: Almost all commercial banks have treasury management solutions ideal for larger businesses. Going forward, these services include market liquidity assessment, cash flow management, and investment management.
  • Various Credit Products: You can access different types of credit account lines through commercial banks, many of them suited for business needs.
  • Equipment Lending: Most commercial banks often offer their customers’ equipment lending financing, renting/leasing, or raw materials financing. Yes, these are essentially loans that businesses can use to purchase necessary equipment for production. These equipment loans can be paid off through recurring monthly payments over a fixed period of time.
  • Trade Finance: On the whole, commercial banks can significantly reduce the risk (to the minimal) of international trade through trade financing. The bank can act as a third party that mediates any divergence between the exporter and importer. It also provide previous business records with contractors and government through bank statements.
  • Commercial Real Estate: Commercial banks sometimes build as well as own properties. This can in-turn be rented to business tenants for conducting revenue-generating activities. These properties can range from a “line of small shops” in the market, brick-and-mortar store to an entire shopping center. Do not forget that most strip malls, retail stores, restaurants, office spaces and so on, are likely to be owned by commercial banks.
  • Foreign Exchange Services: Commercial banks support currency exchange and conversion. This coupled with trade finance makes commercial banks great for conducting international business.
  • Notary services are also included.

Advantages of Commercial Banks

In general, for business survival purposes, both large and small can benefit greatly from banking through a commercial bank. As can be seen above, if a business needs to open a current account, get any type of loan, gain access a line of credit, commercial banks are the way to go. Lastly, you can convert funds for foreign markets through the commercial banks.

3. Investment Banks

Investment banks are a bit different from the other two on the list. Their main function is actually to manage the trade of stocks, securities, and bonds between companies and their investors.  But on the other hand, investment banks act as financial intermediaries and advisors.

These banks often advise individuals and corporations that seek financial guidance. Investment banks play major roles in the mergers and acquisitions of companies, working to reorganize acquired firms.

Additionally, investment banks manage the investment portfolios of businesses and individuals to raise capital for certain businesses and in some cases the federal government.

Investment banks are not like the Wells Fargo down the street, where you can open a checking account. These banks are primarily designed for asset management, corporate finance, and trading.

Services offered by Invest Banks

Here are some of the services you can expect to receive from an investment bank.

  • Corporate Finance: Investment banks are known to facilitate corporate finance for their clients. Investment banks guide corporations through managing sources of funding, capital structuring, and making investment decisions.
  • Merger & Acquisition Assistance: Investment banks walk firms through the process of mergers and acquisitions. These banks play a major role in the M&A process by advising the firms involved to maximize the returns earned from the action. Investment banks evaluate merger proposals and assist the firms in arranging the financing for the deal.
  • Raising Capital: These banks raise money for their clients through facilitating initial public offerings (IPOs), issuing and selling bonds on behalf of the client, and the sale of company shares to investors via private placements.
  • Equity Research: Investment banks often produce reports, perform analysis, and make recommendations to their clients as to whether they should buy, sell, or hold investments that they are contemplating.
  • The sales and trading of stocks, bonds, and various securities.
  • Asset Management: Investment banks manage their clients’ investments with the responsibility of appreciating the investment while mitigating risk. The bank will determine which investments should be made or avoided in the interest of building the portfolio of their clients.

Investment banks profit by charging commissions on returns and service fees for providing their extensive financial services.

Engaging with such banks is ideal for publicly traded companies and individual investors with enough capital.

4. Credit Unions

Credit unions are essentially non-profit banking institutions. In their functionality, they are very similar to retail and commercial banks, and their services are targeted at individual consumers, startups, and small businesses.

Unlike other types of banks, credit unions only serve people affiliated with certain groups, such as people living in a certain region, those living in low-income communities, active members of the military or military veterans, and so on. Credit unions charge much lower fees than other banks, making them ideal for lower-income individuals and businesses. See more on Credit Unions.

Here are the services that credit unions provide:

Issuance of Loans:

Credit unions are best known for providing personal loans and business loans. These are only available to the clientele demographics that they serve. The advantage of these loans is how cheap they are to take out. The fees and rates are very favorable from credit unions. These loans range from auto loans to mortgage loans.

Credit Union Accounts:

Customers of credit unions can open savings and checking accounts with their affiliated branches. Once again, the cost of banking through the union is low, as the account minimums and required fees will be low to non-existent.

Credit Cards for Credit Union:

Affiliates of credit unions can open lines of credit through the institution. There are Reliable Ways to Consolidate Your Credit Card Debts. Check it out.

ATM Services:

Credit unions also feature ATM services, which are ideal for those who don’t qualify for debit cards and need access to their cash.

Student Loans:

Credit unions often dispense student loans with flexible repayment plans at relatively lower interest rates.

Retirement Savings Accounts:

  • for qualifying elderly customers that are looking for a place to save their money.

Secured Loans and Lines of Credit:

Loans and credit cards for those with lower credit scores. This service serves as an opportunity for those with a poor credit history to rebuild their credit.

Notary services:

  • can be carried out through a credit union.

Credit unions offer a host of great banking solutions for those who qualify for them. There are some caveats when it comes to the services that credit unions offer, however.

Factors that affect the availability of credit unions include:

  • The community served
  • The demand for available services
  • The current number of members at the credit union
  • The goals of the controlling board

Credit unions are controlled by an elected board of directors pulled from their member pool. This means that credit unions can differ in policy dramatically based on the composition of the board.

5. Private Banks

Private banks are designed exclusively for wealthy individuals that own at least $1 million in assets. However, the minimum amount of cash required to open accounts varies from bank to bank. Most private banks require their customers to be high net worth individuals, which the Securities and Exchange Commission defines as those who own a minimum of $750,000 in investable assets.

Investable assets include assets that are liquid or near liquid. But even if you have the cash to get an account opened, a private bank account might not be the banking solution for you. These banks are highly exclusive when it comes to which entities they allow to bank with them.

The financial products and services provided by private banks carry fees, and there are account maintenance fees to be aware of. These fees, however, can be avoided by meeting a certain account minimum balance, which shifts from bank to bank.

Here are the services offered by private banks:

  • Preferential Rates: The deposit accounts held with private banks enjoy higher APYs. Relative to other bank types, the fees charged by private banks could be lower. Additionally, private bankers could take advantage of preferential pricing on loans and mortgages.
  • Comprehensive Financial Planning: Private banks often walk their customers through financial decisions. This financial counsel includes creating savings plans, analyzing the financial implications of major purchases, and so on.
  • Investment Guidance: Private banks will also give investing advice to their customers, much like investment banks, private banks guide their customers on subjects like the sale and purchase of securities, stocks, and bonds, and asset allocation.
  • Wealth Management: The broad umbrella of wealth management is included in the services of private banks. Everything from legal advice, estate planning, personal accounting, retirement planning, and tax guidance is provided to private bankers.
  • Credit Services: Private bank customers can open lines of credit with their bank and enjoy lower rates compared to other bank types.
  • Lending: Private banks also give out loans for their clients to ease the purchase of major luxury products or things like land, property, and so on.

Advantages of Private Banks

Private banking is a highly advantageous and unique banking solution. Opening an account with a private bank opens the doors to myriad financial tools, products, and services. Private banks are essentially personal accountants and financial advisors that hold your money.

The catch is that you need to have enough cash to open an account and keep up with the account minimums. If you are a wealthy, high-net-worth individual, private banks are ideal for you thanks to the long list of benefits they provide.

6. Online Banks

Some banks have no physical locations and exist entirely on the internet. Online banks are a relatively new trend that maximizes convenience. With an online bank, you can perform all of your banking needs from your smartphone.

This type of bank is highly popular outside of the United States, particularly in east Asia. One of the most enticing features of mobile banking is completely contactless transactions. You can use the app of the bank to read QR codes which will open a field through which you can purchase products. Convenience is the primary perk of mobile banking.

Services of Online banking

Here are a few more:

  • Fewer and Lower Fees: Since internet-exclusive banks don’t need to pay for the expenses of physical locations, customers of these banks enjoy savings. There are fewer fees associated with these banks. Most online banks don’t charge minimum balance fees nor overdraft fees. Any fees that do exist are almost guaranteed to be lower than competitors.
  • Credit Services: Lines of credit can be opened through mobile banks. These will also likely charge competitive rates and lower fees due to the overall inexpensive nature of online banking.
  • Simplicity: These banks are very simple. Most of them only offer basic checking and savings accounts, and some offer credit programs.
  • Universal Access: Your bank will never be out of reach and that includes customer service, which can be reached remotely at any time.

Overall, mobile banks are highly convenient banking solutions that are easy to use and won’t cost much to use. The only issue to be found with these banks is how limited their services can be in the absence of physical locations.

7. Savings and Loan Associations

Savings and Loan associations are technically not banks in the traditional sense. These are mutually owned financial institutions that offer mortgages, refinance loans, and alternative home loans using deposited savings. Also known as “thrifts”,  the functions of the institutions vary, and some or publicly traded companies.

Here are the services you can expect from a savings and loan association:

  • Accounts: You can open checking and savings accounts through savings and loan associations.
  • Loans: Thrifts offer a wide variety of loans, and most of them are home and property-related

These are simpler institutions that are locality-oriented and encourage people to buy homes in certain areas. See details about Cash Advance Services – Best Instant Cash Advance Loans Matching Services.

8. Shadow Banks

It is now time to go over the Shadow Banking System. Look at it this way; if Shadow Banking sounds a little too tough for your liking, note that it has other names. The industry is also referred to as Market-Based Lending. As such, it is a banking network that is not bound by the same regulations that other major banks need to comply with.

The Financial Stability Board (FSB) has reported that Shadow Banking assets are estimated to be as high as $75 trillion. Essentially, shadow banking is unregulated credit intermediation. These institutions take money from savings accounts and investors and lend it to borrowers.

These transactions are known as shadow transactions only because they are not as regulated or held to the same scrutiny as the same transactions would be under other banks.

Shadow banks offer the following services:

  • Credit Lines: You can open lines of credit with shadow banks. This credit is backed not by the treasury of a central bank, but by borrowed money from savings accounts and investors.
  • Loans: Loans can be taken out of shadow banks. The source of the money is the same.

Again, shadow banks are not technically banks, however, they can offer some of the same services as actual banks but without the high government scrutiny that they undergo.

Many people transact through shadow banks, but it’s not everybody’s cup of tea since it can often lead to having a legal target on your back.

9. Neobanks

First of all, the Neobanks is a new type of bank in which smaller, digital platforms performing the same services as retail banks. All this is done without the retail presence. They are completely seen online. Therefore, these banks have low overhead and are therefore more likely to offer better features to customers that typical banks won’t offer. Simple.

Question now will be what exactly they do that other banks cannot. This would include things like foreign exchange services, a multi-currency account, and so on. While on the other side, retail banks would offer these services too, only their top-tier clients are privy to these benefits. With Neobanks, every account is treated equally, no execptions.

Basically, the interesting thing about Neobanks is that a lot of them are not actually banks. They will hold your money in a segregated account held by a real banking institution but the money is not loaned. Instead, a very small transaction charge or account fee is collected instead of the loan business.

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10. Challenger Banks

The Challenger banks are called challenger banks precisely because they are challenging the traditional format of banking.

In addition, Challenger banks are more of a hodgepodge of many other bank types, so long as they are not traditional banks.

Note that Challenger banks are not quite neobanks because they can also include shadow banks as well as other private banks like Mutual banks who buck traditional norms.

Lastly, Challenger banks are often ones that are talked about in the news, but as of late are more likely new startup banks, or virtual banks, that are using technology to change how the banking world works.


Believe it or not, there are even more types of banks that we couldn’t cover in this article alone.

Banking is a multivariate service that includes much more than just checking accounts, savings accounts, and loans. 

There are a lot of options for you when considering opening a bank account.

  • 10 types of local and international bank
  • Full list of types of banks wikipedia
  • Download types of banks pdf
  • New types of banks
  • Types of banks in Nigeria and Africa
  • Types of banks in India and Asia
  • Examples of banks in Europe
  • All types of banks in America

Going forward, to make sure that you choose the best banking solution for your financial requirements, be careful to consider your income, wealth, debt, and future.

Do not forget that all banks play many vital roles in the global economy, and it’s all powered by our money.

Finally, choosing the right bank for your financial needs is an incredible way to get your money to work for you.