Financial services are economic services provided by the finance industry, which encompasses a broad range of business sector firms that manage money, including credit unions, banks, insurance companies and credit-card companies. They offer a variety of products and services, such as saving accounts, checking accounts, investments, loans and credit-card products. The financial services industry is a vital part of any economy, as it allows individuals and businesses to save and invest their money, and to borrow money when needed for purchases or investment projects. The financial services industry is also a major source of employment, with more than one-third of the world’s workforce employed in this field.
What are the different types of financial services?
There are many different kinds of financial services, each serving a unique purpose. For example, investment services provide advice and capital to individuals looking to grow their wealth through the purchase of stocks, bonds and other securities. These services may include brokerage, research, and advisory. Other important financial services include credit-card services, which provide cards with rewards programs and other features to help consumers manage their debt and improve their credit scores. These services may also include private banking, which provides personalized services for high-net-worth individuals and families.
Another essential financial service is insurance, which helps protect people and businesses against the risk of unforeseen losses or expenses. This can include coverage for a loss of income or property (e.g., life or homeowners’ insurance), as well as protection against liability (e.g., auto or travel insurance). Insurance is a form of financial good, but it’s also a financial service because the brokers and underwriters who create these policies are providing a service by allowing people to purchase this safety net.
Finally, there are depository services, which allow individuals to deposit cash and receive interest payments. Banks, for example, offer this service by accepting individual savings deposits and lending them to borrowers who need funds for various purposes, such as starting a business or purchasing a home. This type of intermediation is a key function of financial services, as it redistributes risk by spreading it out among a large group of savers and borrowers. It also helps to ensure that people who need funding can access it quickly and easily, which is important in an emergency, such as a sudden illness or natural disaster.