Financial services include all the professional firms that manage money-like banks, brokers, mortgage lenders, investment managers and credit card companies. These firms serve individuals, large businesses and even nonprofits. They handle savings and investments, insurance, debt management and redistribution of risk. When you think of the term, it might bring to mind Wall Street or large commercial banks. However, the industry also includes small community banks and credit unions.
Banking – This is the oldest of all the sectors that make up the financial services sector. Banks provide deposit accounts like checking and savings, loans such as mortgages and auto loans. They also offer investment products like mutual funds and stock trading. Banks earn revenue through fees, commissions and interest income.
The tertiary sector is a vital part of any economy. Its growth helps in the development of the primary and secondary sectors. It also ensures balanced growth of the economy. Financial services help in achieving this goal by providing credit to the tertiary sector in order to boost its development. They also provide facilities for importing and exporting goods and services.
Insurance – It is one of the most important sub-sectors of the financial services sector that provides protection to individuals against unforeseen risks such as death, disability or injury to property. It also covers liabilities such as lawsuits. The emergence of many different types of insurance has made the insurance industry an integral part of the financial services sector.
Producers of consumer goods can benefit from the financial services by getting finance for their production through hire purchase, leasing and housing finance companies. This encourages production, saving and investment. This also increases the employment opportunities in the tertiary sector.
Other parts of the financial services sector are global payment providers such as Visa and Mastercard, debt resolution services and exchanges that facilitate stock, derivative and commodity trades. These services are necessary for the proper functioning of the financial system.
While most of us consider the financial services sector to be a very important aspect of our lives, not everyone understands what it really encompasses. Many people think that banks, brokerage companies and credit card companies are separate entities but they all fall under the umbrella term of financial services.
The field of financial services is so broad that it is difficult to categorize it into a few different groups. Generally, it can be broken down into three categories: consumer finance, corporate finance and asset management. In consumer finance, the main areas are retail and wholesale banking, credit cards, mortgages and car financing. In corporate finance, the main areas are capital markets, private equity and venture capital. In asset management, the main areas are hedge funds and fund management. Regulatory bodies are the backbone of all industries and the finance industry is no exception. There are various independent agencies that regulate the different sectors of the industry. These regulators are responsible for ensuring the stability of the market and they also protect the rights of consumers.