As the merchants were engaged with money transaction, it may be said that they had a great contribution on the development of bank. Adam Smith compared the Merchants to “Financial Company’. That time, the situations which were in favor of the development of banking system for the merchant were as follows-
1. Merchants were rich people of the society.
2. For their own sake they were honest.
3. Big amount of money were transacted daily by the merchants.
4. Because of trust and safety many people deposited their money to them.
5. They dealed with people commercially by collecting deposits and providing loan.
Due to their high reputation they issued documents that were taken all over the world as title of money. These documents are well known as-
1. Bank draft.
2. Pay order.
3. Traveler cheque.
4. Letter of credit.
Due to the co-operation of merchants the first bank ever in the world was established in Italy called “bank of Venice” in 1157.