Financial services are the businesses that help consumers and companies manage their money and make financial investments. They include banks, credit unions, brokerage firms, insurance companies, and investment management firms. Financial services also include other institutions that provide critical utilities for the financial industry, such as payment systems and credit-card networks.
A financial good is something that lasts a long time, such as an automobile or a home, and a service is the action that goes into getting that good. A mortgage is a financial good, and the process of getting one is a service. The financial services sector is responsible for all of the activities that go into buying a house or a car, including loan applications and inspections, credit checks, mortgage loans, and insurance policies.
Governments oversee many of the activities in the financial services sector. Licensing, regulation, and supervision vary by country. The recent history of the sector is marked by changes in consumer behavior and deregulations in global markets. This has led to the mergers of banking, brokerage, and insurance companies, creating large multi-service financial conglomerates.
Banks are a crucial part of the financial services sector, providing essential products like savings accounts and checking accounts. But many people don’t understand what exactly a bank does for them. A bank takes money that savers entrust to them and lends it to borrowers, generating interest income in the process. A bank can also provide other valuable services, such as offering advice on investing and saving, or administering payments through credit and debit cards.