Financial services are the businesses that manage money and provide a range of other support functions. They include depository institutions, such as banks and credit unions; brokers and investment firms; insurance companies; credit-card issuers; and other firms that perform critical services like accounting, tax filing, and business process outsourcing. These providers of essential financial services enable people, small businesses, large corporations, and even government entities to manage money and meet their financial goals.
The economic health of a country is tied closely to the strength of its financial sector. This sector makes loans to help businesses expand, offers mortgages to house families, and provides insurance policies that protect against loss of life or property. Financial services also facilitate savings by providing places for families to keep their money safe, such as banks and credit unions. This allows families to build wealth and contribute to their communities.
To make this happen, the financial sector needs to be stable and trustworthy. Savers and borrowers alike must trust that financial services will be available when needed, that they will not lose their hard-earned money, and that the information provided is accurate.
This is why financial services must be regulated. It is the only way to ensure that consumers are protected and businesses can flourish. However, this can mean that more red tape and bureaucracy are added to the industry which can slow down growth and innovation.
Despite their many differences, all financial services share common characteristics. They are all businesses that manage money, which is why it is important to understand the various sectors of this industry before diving in.
Some of the most popular jobs in this sector are in banking, credit card companies, and insurance. The banking sector includes depository services, which provide checking accounts, savings accounts, and other deposit products where people can save their money securely and earn interest on those funds. Banks lend money to borrowers who need capital for a variety of purposes, from starting a new business to buying a home. They may also underwrite debt and equity for private and public companies to raise funds or finance mergers and acquisitions.
Another important part of this sector is credit cards, which allow individuals to conveniently access the cash they have saved in their checking and savings accounts. Credit cards are also a convenient method for individuals to pay for goods and services. The credit card industry is highly regulated and must adhere to strict rules to remain competitive.
One of the most overlooked aspects of this sector is business processing services, which are critical to the operation of the financial industry and other sectors. These providers handle things like payroll, invoice processing, and credit checks for customers. They also provide data management, accounting, and reporting services for companies. In addition, they may offer specialized services to support the financial industry, such as Business Process Outsourcing (BPO). This allows these companies to focus on their core competencies and outsource less-important tasks to reduce costs.