Financial services encompasses the industries that deal with managing and exchanging money. This sector includes roles such as banking, investing and insurance. These companies are instrumental in a healthy economy. They help individuals get the mortgages and loans they need, save for retirement and education, buy homes, cars and other goods and services. They protect against illness (health and life insurance), property loss or damage (homeowners and car insurance) and liability or lawsuit (personal and business insurance).
The financial services industry is undergoing major changes, particularly due to consolidation and increased regulation. The industry is also being disrupted by new actors that are bringing their own strengths, weaknesses, opportunities and risks to the table. These include fintechs, digital giants expanding into financial services and other players from other industries.
In the past, banks dominated the financial services industry. Banks provide depository services by collecting savings from depositors and then lending them out to borrowers. They evaluate the creditworthiness of borrowers and determine interest rates. They also offer investment products such as mutual funds and stocks.
The other types of financial service providers are brokerage firms, private equity providers and venture capital providers. These providers provide financing for startup businesses in exchange for ownership stakes and profit participation. They also provide a range of intermediary services including securities underwriting and clearance, payment and funds transfer services, asset management, and brokerage and agency services. They also provide information and research to support their services.
