The Financial Services Industry
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Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit-card companies, banks, insurance firms and brokerage houses. Financial services also include the capital markets, which channel money from savers to investors in exchange for shares or debt, and help individuals and businesses raise money. The more developed a financial system is, the more easily savers can find investment opportunities, and the more efficiently entrepreneurs can gain access to funds.
The financial service industry is a crucial component of the national and world economy. It affects all sectors of the economy, from individuals and small businesses to large corporations and governments. The more financially successful the sector is, the stronger the economy overall. This is especially true in the case of banking and finance, which manages the money supply and lends to consumers and businesses.
While many people consider financial services to be a collection of separate industries, the truth is that they are all interconnected. The pillars of the industry are banks, brokers and mortgage lenders but the field also includes investment firms, securities traders, Wall Street and much more. The industry has been shaken by deregulation, globalization and recent scandals but is poised to rebound from the market collapse that ushered in the great recession.
Some of the more well-known aspects of financial services are savings accounts, checking and saving accounts, and loans. These provide a means for people to store and secure their money as they work toward goals like purchasing a home or starting a business. The industry is further comprised of the securities and commodities markets, which allow people to trade in stocks and other assets. The debt and equity markets facilitate the raising of capital by companies or individuals for growth purposes.
A subset of financial services is insurance, which provides protection against loss (life, health or property), in exchange for a premium paid to the insurer. This type of insurance is offered in various forms, such as life or disability income insurance, property and casualty insurance, and annuities. The industry is also bolstered by private equity and venture capital providers, who provide investment capital to businesses in exchange for ownership stakes or profit participation.
Other facets of the industry include payment services, which enable businesses to accept credit and debit card payments in return for a percentage of each transaction. Another area of the industry is structured finance, which involves developing more intricate products for high-net worth individuals or institutions. It is a highly dynamic sector, with new technology and globalized markets driving rapid change. It is also a competitive environment, with savvy customers seeking innovative ways to invest and manage their money. This makes customer retention and acquisition important to the success of the industry. This is why so many financial service providers offer a variety of tools that can help customers improve their finances. The bottom line is that when a financial service provider can increase the number of its customers, it can boost revenue.