When it comes to financial services, people often think of banks, brokers and mortgage lenders. However, the industry is broader than that. It includes insurance companies, securities traders, investors, Wall Street and more. The financial services sector also provides small businesses, large corporations and nonprofits with the resources they need.
Financial services firms provide depository services by accepting funds from depositors, storing them safely and offering them to borrowers on demand or through loans, earning revenue by charging fees, commissions or the spread between rates charged to borrowers and paid to savers. They also offer a range of investment products like mutual funds and equity trading.
A healthy financial services sector is important to the economy. It helps individuals save for down payments and retirement, safeguards property and health through insurance, and allows businesses to grow and thrive by providing capital in the form of loans. It’s a lifecycle-based industry that requires deep knowledge of customers and their needs at each stage in their lives. Banks look at data to anticipate a customer’s next big move and tailor their products accordingly.
The financial services industry has a long history of innovation, especially when it comes to technology. From blockchain and cryptocurrencies to cybersecurity solutions, a variety of tech tools are being used in the sector to improve security, speed and coverage. For example, robo-advisers are helping investors manage their portfolios with the help of artificial intelligence.
In addition to traditional banking, other types of financial services include private equity funds and venture capital providers, which supply investment capital in exchange for ownership stakes or profit participation. They also underwrite debt and equity for mergers and acquisitions and offer structured finance, which develops intricate (typically derivative) products for high-net worth individuals or institutions with more complicated financial needs.
Other services provided by the financial services industry include credit card networks and services, global payment providers, currency exchange services, wire transfer services and debt resolution services. They also provide various advisory and consultancy services to help individual clients, companies and governments with their financial matters. Finally, they provide research and analysis on specific sectors or markets to help investors make informed decisions. They can also offer advisory services for wealth management, such as estate planning and taxation.