Financial services are a broad category that encompasses a wide range of services and products in the finance industry. This includes everything from insurance and money management to payments and digital banking technology.
The Financial Services Sector – A key component of any country’s economy, the financial services sector encompasses thousands of depository institutions, providers of investment products, insurance companies and other credit and financing organizations that are critical to economic growth and stability. These include banks, credit unions and other institutions that offer depositors access to bank accounts, personal loans and other financial products and services.
A strong financial services sector can boost a country’s economy and help consumers gain confidence, buying power and higher wages. However, a weak or failing financial services sector can drag a nation’s economy into crisis.
Business – The largest category of financial services, the business sector is the main provider of most of the goods and services used to manage an individual’s finances. These goods and services include mortgages, insurance policies, retirement savings plans, credit cards, brokerage and other investments.
Banking and Credit – The next largest sector of the financial services industry is commercial banking, which includes lending money to businesses and individuals. This includes deposit-taking and loan-sharpening operations that accept a variety of deposits from customers, including cash, checks, savings and certificates of deposit.
Payments – This service area encompasses everything from payments for a purchase to payments that an individual makes on behalf of a business. It also covers collections, and debt recovery.
Asset Management – The final financial services industry sector is asset management, which involves handling such things as pensions and insurance assets. This is a more complex field, and many different firms specialize in this area.
Family office – Similar to private banking, family offices provide financial planning and wealth management services to wealthy families or small groups of wealthy individuals. They may operate as an entire entity or be a department within a larger institution.
Advisory Services – These firms are also called financial advisers, and serve as the primary liaison between a client and a firm’s other departments. They often work closely with a client’s tax and legal advisors, accountants, investment specialists and other professionals to develop a financial plan.
Insurance and Financial Risk – This is an important aspect of the financial services industry, as insurance and other risk-related services are often a large part of the intermediation process that supports the business of the financial sector. This includes risk-sharing with lenders and insurers to protect the interests of savers or investors.
Licensing, regulation and supervision – Governments have regulatory bodies to oversee the financial sector, which helps to ensure that financial services are provided safely and efficiently. These agencies oversee the various industries that make up the finance industry, including banks, insurance and other financial institutions, securities firms, investment management and other organizations.
These regulations vary by jurisdiction, but most have a strong focus on protecting consumers and fostering trust between the service provider and the consumer. They typically involve licensing and regulatory processes and oversight by independent government agencies. These entities are designed to maintain the integrity of the market and prevent fraud and abuse, while providing a level playing field for all parties involved in the financial services industry.