Financial services are the activities that businesses, governments and individuals engage in to further their economic goals. These goals may be to buy or sell products, to save money for future expenses, or to get a loan in order to start or grow their business. Financial services include banks, credit unions, insurance companies and investment firms. Financial markets, the organizations that connect buyers and sellers, and financial utilities, which help to settle and transfer funds between parties, are also part of this sector.
The industry is dominated by large, global institutions that provide multiple services to their customers. These institutions have the resources and technology to manage risk across time zones and countries. They also have the ability to respond quickly to disruptions, such as natural disasters or terrorist attacks, by working with suppliers and clients around the world.
Banks provide a wide range of financial services, including deposit-taking, lending of all kinds, cash management and payment services (including cheque clearing, wire transfers and bill payments). They can also offer other financial services such as securities trading and underwriting, as well as provide advisory and intermediation services (including credit reference and analysis and asset management).
Most people are familiar with the concept of insurance; it’s one of the few financial goods that everybody uses. Insurance is a financial service as much as it is a financial good, providing a safety net for unexpected events that might otherwise derail your plans. Financial services companies that offer insurance policies include life, auto and home insurers as well as reinsurance and pension providers.
Other financial services companies focus on investments, with investment firms offering advice and portfolio management to individual investors. The companies that make up this category may be private equity firms, hedge fund managers or investment advisory services. These firms are usually structured as separate entities, with their own regulatory requirements and audit processes.
Finally, there are the financial market utilities, which provide essential support functions for the whole sector. These can include stock exchanges, clearing houses, derivative and commodity exchanges and payments systems such as real-time gross settlement or interbank networks. They can also include the services offered by central banks, such as monetary policy-setting and research.
As a result of technology, and especially the internet, many of these firms are increasingly using cloud-based solutions to enable them to work globally without worrying about IT infrastructure or security issues. This has helped them to improve productivity and efficiency while lowering costs for their customers.
Despite the challenges facing the industry, there are still plenty of opportunities for those who want to get into the financial services sector. The industry is known for promoting from within and rewarding talent over tenure, so it can be an excellent career choice for those who are ambitious and willing to learn. And with new tools being introduced to the field seemingly every day, there is always something new to learn. The key is to find a niche that suits your skills and interests.