The Difference Between Commercial and Retail Banking


You need a bank account for your business, and you know that there are two types of banking: commercial and retail. If you’re just getting started with your business, you may be wondering, “What’s the difference between commercial banking and retail banking?”

The difference between commercial and retail banking is that commercial banking offers services for businesses and retail banking offers services for individuals. 

Let’s dig a little deeper to give you a better idea of how these banking segments differ.  

What is retail banking?

The name, retail banking, can be misleading. You may hear retail and think this type of banking is for shops and stores. 

In this case, though, retail means providing banking services to consumers. The terms retail banking and consumer banking are interchangeable. 

If you have a checking or a savings account, you already do some retail banking. Loans used to finance the purchase of a car or a house are also retail banking products.

Here are some of the services retail banking offers:

  • Checking accounts for your everyday banking
  • Money market accounts and certificates of deposit for saving 
  • Home mortgages to buy a house
  • Car loans to buy a car
  • Personal credit cards 
  • Home equity loans and home equity lines of credit
  • Personal lines of credit 
  • Order foreign currency
  • Get cashier’s checks or money orders
  • Make wire transfers

With retail banking services, if you want to open an account or make a transaction, all you need to do is walk into a bank branch and talk to a teller. 

You may be thinking, “But I have my accounts at a credit union, and they do all of these things too.” 

You’re right, though a credit union is not a bank, It offers the same retail banking services as a bank. The main difference is that credit unions are nonprofits, while retails banks are in business to generate a return for their shareholders.

Retail banking is continually evolving. Many people use retail banking services without ever stepping foot into a bank‘s branch. Many banks provide extensive services through their websites or over the phone, and some only exist online. 

Automated Teller Machine (ATM) technology has also advanced to provide a variety of services. These advances have led to less foot traffic in bank branches and branch closures. Closures have been particularly high in rural communities.

What is Commercial banking?

Commercial banking provides many of the same services as retail banking but for businesses. Typically, banks offer both commercial and retail banking under the same roof, yet they usually operate as independent banking segments.

Here are some of the services commercial banking offers:

  • Business checking and savings accounts
  • Business loans, such as term loans, lines of credit, and commercial real estate mortgages
  • Treasury management services, such as accounts payable and receivable products
  • Merchant services, such as credit card payment solutions and fraud protection
  • Trade finance services, such as letters of credit, export and import banking products, and foreign exchange risk management
  • Corporate card services for the travel and entertainment expenses of your employees
  • Investment banking services, such as mergers and acquisitions and corporate finance services
  • Many banks provide insurance products for commercial clients, such employee benefits solutions and business insurance

For many of these services, businesses will work with a designated commercial banking representative or relationship manager.

Depending on the size of the bank, commercial banking may be segmented by company size. These segments include business banking, middle-market banking, and corporate banking. 

The bank I worked for divided these segments based on the annual revenue of a company. For example, business banking handles clients whose businesses generated up to $10 million in annual revenue. Businesses that had sales higher than $10 million fell into the middle market category. The corporate banking segment managed large national and international corporations.

The cutoffs for these segments vary by bank. In some banks, there are dedicated relationship managers, credit officers, and credit policies for each segment.

Commercial banking is slowly catching up to retail banking on the technology front. More banks have started to roll out robust web banking and mobile banking platforms. There is now a handful of internet banks that offer limited commercial banking services.

Other Considerations

Now that we’ve discussed the differences between commercial and retail banking, you should understand that one is for businesses, and the other is for individuals. 

There may be some situations where you are still wondering if you need a business account or a personal account. For example, if you are a freelancer or sole proprietor.

The best advice is to have a separate account for your business activities. This applies to all business types.  It makes it easier for you to track spending and income if you keep the two separated. It’ll also make things easier when tax time comes.

You also want to consider the possibility of “piercing the corporate veil” if you’re registered as a limited liability company or corporation. The risk of opening yourself up to liability by intermingling personal and business assets is too high. 

Another situation where you may still be unsure about retail and commercial banking is residential real estate. You can get a traditional residential mortgage for properties with up to four units.

This changes when you want to finance a property with five or more units. For these types of residential income properties, you’ll be dealing with the commercial bank and getting a commercial mortgage. 

The difference between a residential mortgage and a commercial mortgage is the underwriting requirements. These requirements are often more stringent than those of residential mortgages and tend to drive the cost of the project higher. 

If you have little experience with managing multifamily real estate, low net worth, and minimal liquidity, you may want to stick with four-unit properties.


Many banks have both retail and commercial banking segments, so you can usually walk into any bank branch and get what you’re looking for. 

Odds are, you already have retail banking accounts with a bank. If you’re looking to begin a business banking relationship, your current bank is an excellent place to start. To learn more about how to choose the best bank for your business, take a look at this guide.

Retail and commercial banking both serve their specific purposes. As a business owner, it helps to know which one offers the services you need and who to talk to at your bank to get them. 

If you have any questions about retail or commercial banking, send me an email at To stay up to date on new blog posts, subscribe to The Helpful Banker below. 

About the author

David Campbell

I spent several years as a commercial banker lending money to companies like yours. I started The Helpful Banker as a resource for business owners that want to grow their businesses with bank financing.

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