Financial services are the economic services provided by the finance industry, which encompasses a broad range of service sector firms that provide management of money, including credit unions, banks, investment funds, insurance companies and other credit-granting institutions. Financial services companies often offer a wide variety of career paths for candidates, from entry-level positions like teller and customer service representatives to financial advisors and investment portfolio managers.
Financial markets and services are an integral part of the global economy. They help investors allocate their capital, and allow individuals and organizations to take out loans and buy products. These companies also play an important role in regulating and limiting inflation. They also influence other sectors in a country’s economy by setting the standards, practices and regulations they follow.
Despite the importance of financial services, most people have little understanding of what they actually comprise. This is why financial inclusion matters: It helps millions of people escape poverty, while billions more build a better economic life by accessing the tools they need to invest and save.
The vast majority of the world’s population lives in poverty, and a lack of financial services is a key reason why. Millions of people are trapped in a cycle of poverty, and their ability to escape depends on the availability of innovative new financial services, which will enable them to grow their business, improve their health, and invest in their futures.
Many of these innovations will be delivered by digital technology, and can be based on smartphones and mobile data. For example, digital micro-loans will help women start small businesses and make a living. And digital-to-physical currency conversions will let consumers transfer money between countries without the need for banks.
Financial services can be broken down into five distinct categories:
Banking – The traditional definition of banking includes both deposit-taking and lending activities. Banks can hand out savings accounts, offer mortgages, give loans to buy cars or houses, and lend money to other companies for investments. They can also offer cash management services to businesses and individuals, as well as market-making activities like securities trading.
Credit and lending – Credit is the basis for all financial services, as it allows people to buy things now and pay later. Lenders can be banks, credit-card companies, or credit unions, and they can also be regulated by government agencies. These lenders can assess a person’s creditworthiness, set credit limits, and offer loans to those who qualify.
Other financial services – These include investment funds, private banking and prime brokerage services. Investment funds maintain their own departments that research and buy and sell securities on behalf of their clients. Private banking is a form of bundled broker services that provides more exclusive services for high-net-worth individuals and hedge funds. Prime brokerage services are the highest level of a bundled service, and they provide exclusive access to proprietary market-making technologies and research.
The overall purpose of the financial services industry is to manage the flow of money and keep it safe from risk. This is accomplished by creating and managing markets that encourage a stable, healthy economy and by establishing the rules and regulations that govern those markets.