Historically, but less so today, private persons or partnerships could carry on the business of a bank; mostly receiving monies on deposit, paying interest on those deposits, and extending loans of those monies to third-paryies at a higher rate of interest.
In 1899, the United States Supreme Court (Austen) used these words:
"A banker ... is a trader who buys money, or money and debts, by creating other debts, which he does with his credit - exchanging for a debt payable in the future one payable on demand.
"The first business of a banker is not to lend money to others, but to collect money from others.
"A banker (is) a dealer in capital, or, more properly, a dealer in money. He is an intermediate party between the borrower and the lender. He borrows of one party and lends to another."
In United Dominions (1966), Justice Diplock wrote:
"It is essential to the business of banking that a banker should acept money from his customers on a running account into which sums of money are from time to time paid by the customer and from time to time withdrawn by him by cheque....
"... the banker must also undertake to pay cheques drawn on himself (the banker) by his customers in favour of third parties up to the amount standing to their credit in their current accounts and to collect cheques for his customers and credit the proceeds to their current accounts."
As the history of the term, the US Supreme Court, in Austen, added:
"The very first banking in England was pure borrowing. It consisted in receiving money, in exchange, for which promissory notes were given, payable to bearer on demand; and so essentially was this banking, as then understood, that the monopoly given to the Bank of England was secured by prohibiting any partnership of more than six persons to borrow, owe, or take up any sum or sums of money on their bills or notes payable at demand. And it had effect until 1772 (about 30 years), when the monopoly was evaded by the introduction of the deposit system. The relations created are the same as those created by the issue of notes. In both a debt is created; the evidence only is different. In one case it is a credit on the banker's books; in the other, his written promise to pay. In the one case he discharges it by paying the orders (checks) of his creditor; in the other, by redeeming his promises. These are the only differences. There may be others of advantage and ultimate effect, but with them we are not concerned."
And, in his 1816 Law Dictionary, Williams noted that:
"Goldsmiths were the first who got the name of bankers in the Reign of King Charles the Second."
REFERENCES:
- Auten v United States National Bank 174 US 125, published at http://altlaw.org/v1/cases/388326
- Union Dominions Trust v Kirkwood 1966 1 All English Reports, page 968; at pages 986-987
- Williams, T. W., A Compendious and Comprhensive Law Dictionary Elucidating The Terms and General Principles of Law and Equity (London: Gale and Fenner, 1816).