Merchant bankers work for banks that deal with international finance, commercial lending and underwriting. These professionals provide specialized banking services, and they typically do not work with the general public.
Rather than lending cash to their clients, merchant banks provide their clients capital in the form of shares from privately or publicly held companies. Merchant bankers offer advice to multinational corporations, including advice on mergers and acquisitions. They also provide portfolio management, credit syndication and insurance services.
Merchant bankers may work for commercial or investment banks. Commercial banks are banks that offer retail banking services, such as deposit accounts, as well as loans and investments. Investment banks do not accept deposits and are instead focused exclusively on investments.
In the United Kingdom, the phrase "merchant banking" is used only to describe investment banks. It is not used to describe commercial banks.
In the past, merchant bankers worked with commodities, such as wheat. For example, merchant bankers offered farmers cash in exchange for the wheat the farmers anticipated producing. These loans were used to finance long trips or farming. Now, however, most merchant bankers deal with all kinds of equity investments, and the industry bears little resemblance to its medieval roots.