Almost every household and business has financial needs. These may be to save, invest, or borrow money. Financial services companies make these needs possible through a variety of products and processes. They include depository institutions, providers of investment products, insurance companies, and credit-card companies. They also include global payment systems like Visa and Mastercard as well as credit-rating agencies and debt-resolution companies.
Depository financial services companies provide places for consumers to store their money safely and earn interest on it. These are banks, savings and loans associations, and credit unions. Banks and savings and loans associations primarily offer checking and savings accounts to their customers, but they also lend money through mortgages, car loans, personal loans and lines of credit. Investment companies offer a wide range of stock and bond investment opportunities to their clients, and they also have advisory services for those who need help making decisions about their portfolios.
Private equity funds, venture capital providers and angel investors supply investment capital to new businesses in exchange for ownership stakes or profit participation. They are a vital part of the financial services industry because they enable small firms to grow into large companies with great potential for employment and revenue growth.
Insurance companies offer various forms of insurance to their customers, including life and disability income, health and property/casualty. These companies are a key component of the financial services sector because they help people protect themselves against the risk of unforeseen loss and provide peace of mind.
The financial services industry also includes actuaries, which use data about past events to assess the probability of future risks, as well as underwriters, who review applications for insurance and determine the terms and conditions of policies. In addition, there are a number of other companies that provide critical utilities for the financial sector such as accounting and tax filing services, international money transfer agents, and credit-card machine networks and providers.
One of the biggest challenges for the financial services industry is educating the public about basic money management skills. Many people still lack understanding about how to save, spend and manage their money. This can limit their ability to achieve the financial goals they have set for themselves. For example, a person who fails to save enough money may find it difficult to buy a home or start a business, and a person who cannot manage their credit may struggle to pay for basic necessities.
In developing and emerging economies, many households and small-scale entrepreneurs do not have access to affordable financial services. This can prevent them from saving for a rainy day, borrowing money to expand their businesses, or purchasing essential goods like a refrigerator or a vehicle. It can even lead to severe consequences if they are exposed to a natural disaster or an unplanned medical expense.