Question

What explains the difference between retail and commercial banking?

Commercial banks loan money to small businesses, while retail banks loan money to large corporations.
Retail banks loan money to small businesses, while commercial banks loan money to large corporations.
Commercial banks help small businesses make capital purchases, while retail banks help big businesses invest.
Retail banks help big businesses make capital purchases, while commercial banks help consumers invest.

Answer 1

None of the four choices is correct.

Correct distinction:
- Retail banking serves individual consumers — deposits (checking/savings), mortgages, personal loans, credit cards, and everyday payment services.
- Commercial (or business) banking serves businesses — business checking, commercial loans and lines of credit, cash management, trade finance and services for small, medium and large firms.

(Separately, investment banking is a different function that helps corporations raise capital, do M&A and trade securities.)