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What Are the Functions of a Commercial Bank?

Laura M. Sands
Laura M. Sands

Among the many functions of a commercial bank is the acceptance of monetary deposits, lending money to businesses and individuals, and extending credit to qualified customers. A commercial bank may exist at a physical location or online while offering wire transfer services, online banking services and enabling customers to pay bills online. Other functions include mobile banking options and payroll services for various sized businesses.

Commercial banks are financial institutions owned by shareholders which operate on a for-profit basis. While most of the functions of a commercial bank are widely used by individuals and businesses, some banks that fall under this classification are specifically designated as business banks. A business bank operates similarly to an ordinary commercial bank that caters to general consumers, but with the exception that these banks specialize in services tailored to the needs of small and large businesses. Such services include performing payroll accounting and issuing payroll checks or making direct payroll deposits to employees on behalf of a business banking customer.


These banks accept deposits from customers that are then held in a checking, savings or investment account. Banking customers can choose to withdraw funds, transfer funds between bank accounts and issue checks to others with funds drawn from an existing account. While most of the basic functions are found at institutions within this classification, specific services and fees for these services tend to vary from one bank to another.

In many instances, a commercial bank acts as an intermediary for customers to obtain loans for things like tuition, home mortgages, home improvements or business endeavors. While many banks directly lend money to customers, other lenders often rely on the functions of a commercial bank to help facilitate loan application processes and other necessary loan services. Eligible customers may also be able to receive lines of credit, as such is another of the more popular functions of a commercial bank.

While most of the functions of a commercial bank are offered to consumers and businesses at brick and mortar locations known as bank branches, many banks do not have physical locations but offer services strictly online, instead. Checking and savings accounts, investment accounts, wire transfers and other services are offered through these banks just as would be offered through traditional banks at a physical location. Via both options, many customers are also able to engage in mobile banking in order to check account balances and transfer funds to other accounts.

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