What are Financial Services?

The term Financial Services refers to services involving the saving, lending, investment, and management of money. They are the services provided by the finance industry.

Financial services encompass a vast array of economic services that financial institutions and some other entities provide.

The financial services sector facilitates the management of financial assets for people, businesses, and other organizations. It helps them achieve their financial objectives.

Emarketer.com says the following regarding the term “financial services”:

“Financial services is a broad term used to describe the various offerings within the finance industry–encompassing everything from insurance and money management to payments and digital banking technology.”

“There are a multitude of stakeholders and moving parts within financial services, from credit card issuers and processors to legacy banks and emerging challengers.”

A huge industry

The financial services sector is huge. In 2023, it was worth more than $28 trillion worldwide and continues to grow rapidly.

According to Wikipedia, in the United States, the financial services industry represented 7.4% of GDP in 2018. In the United Kingdom, it represented 34%, according to the United Nations Economic Commission for Europe (UNECE).

Research and Markets, a market research company, says the following about the sector’s major players:

“Major companies in the financial services market include Allianz Group, Industrial and Commercial Bank of China, JPMorgan Chase & Co., Ping An Insurance, AXA Group, Anthem, Inc., Agricultural Bank of China, China Life Insurance, China Construction Bank, and Centene.”

  • Types of providers

There are many different types of companies in this industry. Let’s have a look at some of them:

  • Banks:
    Offer savings and loan services to individuals and businesses.
  • Credit Unions:
    Member-owned financial cooperatives offering similar services to banks.
  • Insurance Companies:
    Provide coverage for health, life, property, and other risks.
  • Investment Banks:
    Specialize in large and complex financial transactions.
  • Brokerage Firms:
    Facilitate buying and selling of financial securities for clients.

A woman withdrawing money from a bank branch in the 1960s and a man performing an online banking transaction.
Image created by Market Business News.

  • Investment Companies:
    Manage portfolios of securities for investors.
  • Private Equity Firms:
    Invest in companies, often to acquire or restructure them.
  • Hedge Funds:
    Pool investors’ money to achieve returns through diverse strategies.
  • Credit Card Companies:
    Issue credit cards and process transactions.
  • Accounting Firms:
    Offer auditing, tax preparation, and consulting services.
  • Financial Planners and Advisers:
    Provide personalized financial advice and planning.
  • Mortgage Companies:
    Specialize in making and servicing home loans.
  • Fintech Companies:
    Use technology to improve or innovate financial services.
  • Payment Service Providers:
    Facilitate payments between parties electronically.
  • Wealth Management Firms:
    Offer investment advice and management services to high-net-worth individuals.

Evolution of Financial Services

Over the last century, the financial services industry has dramatically transformed due to technological advancements and the Internet. Transactions that once required a visit to a bank or a meeting with a financial advisor can now be completed online. This shift has made financial services more accessible and convenient.

The move towards digital services has led to the shutting down of thousands of bank branches worldwide, as the demand for in-person banking services diminishes.

The rise of online trading platforms has democratized stock market participation, allowing people from various socioeconomic backgrounds to invest with lower fees and no minimum account balances.

Furthermore, fintech startups have introduced innovative financial products, making the industry more diverse and competitive. This evolution has led to a more inclusive financial landscape, enabling broader access to financial services and opportunities.

Final thoughts

Financial services are an essential part of the global economy. They serve as the backbone of managing money and facilitating economic growth.

The sector enables individual people, businesses, trade unions, religious organizations, and other entities to save, invest, and protect their financial assets.