The Financial Services Industry

Almost everyone will need financial services at some point in life, whether it’s to open a bank account or invest in real estate. The industry is huge, so there are many different options available, from credit cards to a full suite of investment banking services. There are even financial services firms that operate solely online. With so many choices, it’s important to understand how each financial service works and what kind of risks are involved before making any commitments.

The financial services industry includes all business activities related to the management of money, including banks, credit unions and other deposit-taking institutions; credit-card companies; insurance agencies; and securities brokers. It also encompasses global payment networks like Visa and Mastercard, commodity exchanges and debt resolution services. This sector is responsible for the free flow of capital and market liquidity, which are vital to economic growth.

A key aspect of financial services is the distinction between a “financial good” (like a mortgage loan) and a “financial service.” A financial good is something that lasts for a long or short period of time, such as a house or a car, while a financial service is the process of acquiring a financial good. For example, a person who hires an insurance agent or broker to shop for an insurance policy is engaging in a financial service. In addition, the underwriters who create the policies are performing a financial service.

Governments regulate and supervise the provision of most financial services. They ensure that providers treat customers fairly and abide by applicable laws. The level of regulation varies by country, with some countries having very little regulation and others having strict rules on everything from lending practices to investment advisors.

There are many career opportunities in the financial services industry. The field is growing rapidly, partly because of advances in technology. Some products, such as online savings accounts and brokerage services, are available to a much wider audience than ever before. These products make it easier for people to save and invest in their futures.

Those without access to financial services face enormous challenges in their daily lives. The Consultative Group to Assist the Poor estimates that nearly 2 billion people lack basic financial services, such as checking accounts and loans to expand businesses. The absence of these services limits families’ ability to improve their living standards by constructing or improving homes, purchasing livestock and consumer durables, and investing in new or existing businesses. In addition, many families store their savings under the floorboards or in containers – an unsafe and inflexible way to accumulate and grow funds. Providing financial services can help people break this cycle and escape poverty by giving them the means to make the most of their incomes. By allowing them to borrow and save, these services can also provide them with the resources they need to meet their most pressing needs, such as clean water and sanitation. This is a crucial step towards eliminating extreme poverty and achieving sustainable development goals.