Financial services are the businesses and companies that provide individuals, small businesses, large corporations and the government with banking, investing, credit, insurance, loans and a variety of other products. The sector is a key component of the economy and influences both the global and local economies, and its health has a direct impact on people’s personal finances. When the financial services industry is healthy, it’s able to offer consumers a wide array of products that are accessible and beneficial. When the industry is unhealthy, it struggles to meet the demands of its customers and can lead to a slowdown in economic growth.
The financial services industry is comprised of many different sectors, all of which contribute to the overall health of the economy. These include credit unions, savings and loan associations, banks, credit-card companies, mortgage lenders and securities trading firms. The industry is highly regulated to protect consumer privacy and investments, and independent agencies are designated to oversee financial institutions’ operations, uphold transparency, and ensure that all parties are treated fairly.
Banks are the foundation of the financial services industry, and they serve a wide range of customers with products such as checking accounts, credit cards, money markets, CDs and mortgages. In addition, they work to anticipate their customers’ life events and needs by analyzing data such as customer engagement with other products and spending patterns. The goal is to be present at the right time with the right product, a practice known as “meeting customers where they are.”
Investment banks are a separate category from traditional banks and focus on helping businesses raise capital by conducting mergers and acquisitions, underwriting debt and equity, and providing advisory and wealth management services. Private equity funds and venture capital providers supply investment capital to small business startups and entrepreneurs in exchange for ownership stakes or profit participation.
Insurance is both a financial good and a service, as it provides protection against financial loss (e.g., property damage or liability). The brokers who shop for the best rates on insurance policies and the underwriters who create the policies are also part of this sector.
Other financial services include credit-card networks and processors, payment systems such as real-time gross settlement systems and interbank networks, and global currency exchange and wire transfer services. Debt resolution services are another part of this category, as they help individuals negotiate with their creditors to pay less than what is owed on credit card debt or other personal loans. Other types of financial services include financial market utilities that facilitate stock, derivative and commodity trades. These organizations are often owned by larger financial services companies and act as a marketplace for smaller investors. They may also offer clearing and settlement services for stock and derivatives trades. They may also offer market information and research services. Financial services are important to the world’s economy, and there are many opportunities for those with the right skillset. The key is to understand the nuances of each sector to find the best fit for you.