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What is a bank?
Thomas Vles
4 Nov 2025
6 minute read
A bank is a financial institution that manages money and plays a central role in the economy. You can keep your money safe there, make payments, save, or use financial services that help to manage your wealth efficiently. Banks form an indispensable link between individuals, businesses, and governments by enabling cash flows and bringing liquidity to the market.
At its core, a bank revolves around managing money: receiving, holding, and lending deposits. By providing loans and credit, money remains in circulation and the economy can continue to grow. When you deposit money into your account, the bank uses a portion of that to finance other customers through, for example, mortgages or business loans. In this way, the bank brings savers and borrowers together and contributes to a stable financial system.
A bank therefore not only offers a safe place for your money, but also convenience, reliability, and access to modern payment solutions. Thanks to digital technology, you can now transfer money, pay invoices, or do business internationally within seconds. In this way, a bank supports you as an entrepreneur or individual in efficiently managing your finances.
How does a bank work?
A bank receives money from customers and uses that money to finance other customers through loans or mortgages. You receive interest on your savings, while borrowers pay interest on their loans. This interest differential forms the core of the banks' business model and keeps the financial system in motion. This way, money remains productive, and people and businesses can invest without having to tap into their entire savings.
In addition, banks ensure that payment transactions run smoothly. Whether you are paying an invoice, receiving a salary, or transferring money abroad, the bank ensures a safe and quick handling of every transaction. Banks are also under strict supervision from financial authorities, so your money remains well protected and confidence in the system is guaranteed.
Modern banks combine these functions with digital innovations. Through apps and online banking, you can check your balance, make payments, or link your administration to accounting software at any time. This makes money management easier, faster, and safer than ever.
The 3 main functions of a bank
Various types of banks
There are different types of banks, each with its own specialisations and target audiences. Whether you want to save, invest or bank for your business, there is always a type of bank that meets your financial needs.
Commercial banks
Commercial banks are the most well-known and cater to both individuals and businesses. They offer accounts, loans, mortgages, and payment cards. These banks form the core of daily payment transactions and are the primary financial partner for most customers.
Savings banks
Savings banks focus on safely storing savings and providing interest. Although their role has diminished, savings functions are still important for anyone looking to build wealth without taking risks.
Investment banks
Investment banks assist companies and large organisations in raising capital, mergers, acquisitions, and initial public offerings. They focus less on consumers but play a significant role in international financial markets.
Central banks
Central banks, such as De Nederlandsche Bank (DNB) and the European Central Bank (ECB), oversee financial stability, regulate the money supply, and supervise other banks. They are the foundation of trust in the monetary system.
Online and neobanks
Online banks and neobanks operate entirely digitally and make banking faster and smarter. They have no physical branches and offer innovative features such as real-time payments, automatic accounting, and links to accounting software. GoDutch is an example of such a modern neobank that helps entrepreneurs save time and money with smart automation and personal service.
What can you do at a bank?
At a bank, you can arrange all your financial matters, from saving and paying to investing and business management. Banks offer a wide range of services that help you keep track of your money and achieve your financial goals.
Open and manage a current account
Deposit, withdraw and transfer money
Save and earn interest
Apply for a loan or mortgage
Make international payments
Online banking via apps or the internet
Create links with accounting software
