6 Types of Major Financial Institutions in North America (2024)

With a wide range of financial institutions (FIs) available to businesses, choosing the right one to manage your finances can be overwhelming.

Determining the right banking partner can have a significant impact on your business' success, and there’s no one-size-fits-all solution when it comes to financial institutions. Businesses must consider various factors, such as the level of service, account fees, transaction processing times, and interest rates ― to name but a few.

In North America, there is a diverse range of financial institutions, from traditional banks to credit unions, savings banks, government-backed banks, and more. Research by Plaid indicates that there are a staggering 11,652 FDIC and NCUA-insured financial institutions in the United States alone. Additionally, Canada has another 357 federally-regulated financial institutions, as highlighted in a report by OSFI.

Each FI has its own set of unique features, advantages, and potential disadvantages. In this article, we provide an overview of these different types of financial institutions to help business leaders make informed decisions about which banking partner will best serve their needs.

1. Retail and commercial banks

Banks are undoubtedly the most recognized and familiar financial institutions.

They offer numerous services to customers, including checking and savings accounts, loans, credit cards, and investment services. Banks are federally regulated, which ensures that they operate in a safe and compliant manner. And most banks protect customer deposits through government-backed FDIC insurance in the United States, or CDIC insurance in Canada.

Unlike central banks (which do not work directly with the public), retail and commercial banks primarily offer traditional banking services. Retail and commercial banks also offer digital banking services that allow businesses to manage their accounts online.

Generally, banks tend to charge higher fees than other types of financial institutions, due to the high overhead costs associated with physical branches and staff members. Additionally, businesses must often meet strict, specific requirements before they qualify for certain services, such as loans or lines of credit.

The largest retail and commercial banks in North America

1. JPMorgan Chase
2. Bank of America
3. Citigroup
4. Wells Fargo
5. Royal Bank of Canada

2. Credit unions

Another popular FI option among business owners are credit unions. Credit unions typically have lower fees than banks, since they don’t require physical buildings or staff at the same scale as larger banking operations.

Credit unions also focus on niche industries and local geographies, and are committed to community growth. However, one potential downside is that credit unions typically require customers to become members by paying a nominal fee and meeting eligibility requirements before they can use their products and services.

The largest credit unions in North America

1. Navy Federal
2. State Employees’
3. Pentagon Federal
4. Boeing Employees'
5. Vancity

3. Investment companies

If you’re an established business looking to expand your investment portfolio, an investment company may be the right fit for you.

Investment companies aren’t exactly viewed as traditional banking options. But while they don’t offer the same services as other FIs (such as checking accounts or convenient debit card access), they can provide great opportunities for those looking for investment advice or seeking growth capital through equity investments from external sources.

Investment companies work best for businesses who have already established themselves financially, but are looking for ways to expand their wealth portfolios even further by investing in stocks, bonds, mutual funds, or structured investments like ETFs (exchange-traded funds).

The largest investment companies in North America

1. BlackRock
2. The Vanguard Group
3. UBS Group
4. Fidelity
5. State Street Global Advisors

4. Savings banks

Savings banks are financial institutions that offer a range of services, including checking and savings accounts, loans, and investment programs.

For business owners, savings banks can be an attractive choice, because of their focus on building relationships and providing personalized service to clients. They’re often small or mid-size institutions and can provide more flexibility than larger banks.

A potential downside of savings banks, however, is that they have more limited resources and fewer technological capabilities than larger banks, which can make certain transactions or processes more challenging.

The top savings banks in North America

1. Popular Direct
2. My Banking Direct
3. North American Savings Bank
4. BrioDirect
5. Ivy Bank

5. Internet or online banks

Without the use of physical branches and locations, internet banks or online banks are financial institutions that operate entirely online. For business owners, internet banks offer advantages such as lower fees, higher interest rates on savings and checking accounts, and convenient online services.

Online banks typically provide 24/7 account access and mobile banking apps, too ― making it easy for business owners to manage their finances on the go. However, a potential downside of internet banks is that they lack the personal touch and face-to-face interaction offered by brick-and-mortar FIs. Additionally, online banks may not offer as extensive a range of banking services as traditional banks, such as small business loans.

The top online banks in North America

1. Quontic Bank
2. Discover Bank
3. Axos Bank
4. Ally Bank
5. NBKC Bank

6. Government-backed banks

Government-backed banks in North America are financial institutions that are owned by the government, or partially owned with government support.

Government-backed banks can be an attractive choice for business owners as they often offer loans at lower interest rates than private banks. Additionally, government-backed banks can provide more flexible repayment terms, have a greater tolerance for risk, and offer advisory services for clients. For example, the Business Development Bank of Canada (BDC) has consultants who can help clients in areas such as business strategy, operational efficiency, sales and marketing, and more.

However, government-backed banks are sometimes subject to political influence or constraints, which may lead to changes in lending policies or practices.

Government-backed banks are far more common in Canada than the United States.

Government-backed banks in North America

1. Bank of Canada
2. Business Development Bank of Canada
3. Farm Credit Canada
4. ATB Financial
5. The Bank of North Dakota

The bottom line

Ultimately, all businesses will require some kind of banking partner ― whether big bank or small ― to meet their needs and effectively manage their finances. It’s important that business owners consider all factors to make an informed decision when selecting a business banking partner.

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