Financial services are the activities associated with the creation, distribution, and management of money. Financial services providers channel cash from savers to borrowers, manage investments and insurance risk, redistribute wealth, and provide many other valuable financial intermediation functions. These services are essential to a country’s economic growth and development. They encourage investment and production, allow savings to be reinvestred, and make it possible for individuals to acquire various consumer products through hire purchase or mortgages. Financial institutions also help control the nation’s money supply and manage inflation by setting reserve requirements, adjusting repo rates, and participating in the open market, among other things.
A career in financial services is challenging, rewarding and offers a lucrative salary. However, it requires a great deal of hard work. In addition, the industry is extremely competitive. You need to be intelligent, quick-thinking and a team player to succeed in this field. Having a degree is important, but it is not necessarily necessary to enter the industry. Many large companies in the sector will provide on-the-job training, mentoring and opportunities to advance.
As a result of rapid advances in digital technology, millions of people around the world are being brought into the formal financial system for the first time, with mobile phone-based and other digital channels offering a low cost entry point to the sector. It is estimated that 1.2 billion adults worldwide gained access to a bank or other formal financial service between 2011 and 2017.
People could do most of the things they need to handle their finances themselves, but for convenience, efficiency and security, they often rely on financial services to handle it for them. These include banking (deposits, loans and credit); insurance (life, health, property and casualty); investments (stocks and bonds); and remittances.
Financial service firms are intermediaries that channel money from savers to borrowers and back again. They earn their income from fees, commissions and other sources such as the spread between interest rates charged to borrowers and paid to depositors. They also add value by monitoring investments, pooling risk (by having lots of borrowers as opposed to just one), and providing advice.
In addition, they provide other financial intermediation such as hire purchase, leasing, and the provision of personal and business credit. They also act as advisers to clients on matters such as estate planning and retirement plans. The sector encompasses thousands of depository institutions; asset managers; brokers and dealers; credit-card companies; and the suppliers of critical financial utilities. Financial service companies may be consolidated into holding companies, which offer their own products under their brand name but maintain separate subsidiaries for insurance, brokerage and other services. Alternatively, they may combine their own financial and non-financial businesses into one company, with incentives to cross-sell these products. This is known as a vertical integration model.