The financial services sector encompasses everything that has to do with money and banking. It includes insurance and money management, as well as credit and lending. It also includes payments and digital banking technology. And it includes a host of stakeholders, from legacy banks and new challengers to investors and consumers.
Financial services are vital to the economy. They allow people to make more purchases and invest more of their income. Without a functioning financial sector, economies can stagnate and companies may find it difficult to grow or even stay in business. Financial services also play an important role in a country’s culture, because citizens have more confidence and purchasing power when the sector is strong.
Many different types of financial services are available today, which makes it easier than ever to borrow and save. But with all the options and a changing economy, it’s crucial to understand how they work so that you can choose the best options for you.
The term “financial services” is sometimes used to refer to specific kinds of institutions, but it’s more often used to describe the industry as a whole. It includes thousands of depository institutions, providers of investment products, and credit and financing organizations. These include banks, credit unions, credit-card issuers, and other lenders. It also includes insurance companies, which offer health, car, and home insurance, as well as life insurance.
A financial good is any object that you can own and use to support your lifestyle, like a house or a car. But when you think of financial services, you’re probably thinking of the institutions that provide those goods and the associated financial utilities, like mortgage brokers and credit rating agencies.
Banks are one of the most familiar types of financial services. They’re the place where most people keep their money and receive their loans. But they also offer other financial services, like cashing checks, transferring funds electronically, and notary services. And some banks specialize in specific types of loans, such as student loans or auto loans.
Another type of financial service is a brokerage firm, which acts as a middleman between buyers and sellers of securities. These securities can be stocks, bonds, mutual funds, or other assets. When a broker helps someone buy or sell something, they earn a commission.
Governments regulate many different parts of the financial services industry, from banks to credit unions to fintechs. These regulations include licensing, examinations, inspections, and consumer protection laws. They can also regulate interest rates, impose capital controls, and oversee the operations of financial institutions. Regulatory bodies are responsible for investigating and prosecuting wrongdoing by financial services companies, and they can take over struggling financial firms if necessary. The financial services industry is a global one, and the regulation of its activities can vary by country. The globalization of the industry has also led to increased competition, which has driven some financial services companies to merge or collaborate with each other.