Nature of the Industry

Banks safeguard money and provide loans, credit, and payment services such as checking accounts, debit cards, and cashier's checks. Banks also may offer investment and insurance products. As a variety of models for cooperation and integration among finance industries have emerged, some of the traditional distinctions between banks, insurance companies, and securities firms have diminished. In spite of these changes, banks continue to maintain and perform their primary role—accepting deposits and lending money.

Goods and services. Banking comprises two parts: Monetary Authorities—Central Bank, and Depository Credit Intermediation. The U.S. Federal Reserve System is the central bank of the United States and manages the Nation's money supply and international reserves, holds reserve deposits of other domestic banks and the central banks of other countries, and issues the dollars we use. The credit intermediation and related services industry provides banking services to consumers and businesses. It secures the money of depositors, provides checking and debit card services, and lends money to consumers and businesses through credit cards, mortgages, car loans, investment loans, and lines of credit.

Industry organization. There are three basic types of banks: commercial banks, savings and loan associations, and credit unions. Although some of the differences between these types of banks have lessened, there are key distinctions. Commercial banks, which dominate this industry, offer a full range of services for individuals, businesses, and governments. Commercial banks come in a wide range of sizes, from large global banks to mid-size regional and small community banks. In addition to typical banking services, global banks lend internationally and trade foreign currencies. Regional banks have numerous branches and automated teller machine (ATM) locations throughout a multi-state area and provide banking services to individuals and local businesses. Community banks are based locally and have fewer branches than regional or global banks. In recent years, online banks—which provide financial services entirely over the Internet—have entered the market, with some success. However, even in Internet banking distinctions have lessened as traditional banks also offer online banking, and some formerly Internet-only banks have opened branches.