Financial services are economic services provided by the finance industry, which encompasses a broad range of service sector firms that provide financial management, including credit unions, banks, building societies, mortgage bankers and other lending institutions; brokers and dealers in securities; insurance companies; pension funds and investment advisory firms; and providers of critical financial utilities such as stock exchanges, clearing houses, derivative and commodity markets and payment systems. Financial services also include debt-resolution agencies and credit bureaus.
While the lines that separate different types of financial services are blurring, some key areas are investing and saving, monetary policy creation, credit and lending, and risk management. In investing, people can create their own portfolio of stocks or mutual funds, while savings can be put toward a retirement account or used to invest in property, business startups, and more. The development of these areas is largely driven by consumer demand and technological advancements.
A vital part of financial services is lending, which helps people access the capital they need to start or grow businesses. Lending organizations can take on a wide variety of forms, such as traditional banks that offer mortgages and loans, or alternative lenders like peer-to-peer loan platforms.
Another important part of financial services is insurance, which protects people against unforeseen events. Most people will need some form of insurance at some point in their lives, whether it’s life or health or property or car insurance. Providing this service is also one of the main ways that financial services institutions make money, as they collect premiums and pay out claims over time.