The Importance of Financial Services
Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, consumer-finance firms and insurance agencies. The sector includes everything from investment banking to personal finance and from mortgage lending to credit-card processing. It also covers a number of key sub-industries, such as payments and global payment providers (e.g. Visa and MasterCard), debt resolution services, accounting and tax filings, and currency exchange and wire transfer services.
When most people think of financial services, they typically envision banking, investing and insurance. But the financial services industry is much larger than that. It also includes many other key sub-industries, such as payments, consumer finance and debt services. It encompasses everything from credit card companies and online-only banks to robo-advisers and fintech startups, as well as Wall Street and large corporate financial-services firms.
One of the most important roles financial services play is to channel cash from savers to borrowers. They do this by accepting deposits and repayable funds, then lending those funds and making a profit on the difference between what they pay depositors and what they receive from borrowers. In this way they can add value for savers and investors by aggregating savings, monitoring investments, and pooling risk so that individual investors are not crippled if a few bad loans go bad.
Financial services also help businesses manage risks and make better decisions. For example, companies that offer venture capital and private equity services invest the assets of other firms in startup companies that are attempting to create new products or grow existing ones. This helps companies gain access to new markets, increase their market share and boost revenue.
The presence of financial services also helps reduce the amount of risk a business has to take on when it comes to production and sales. For instance, producers can secure loans to purchase equipment or materials they need to complete a project. This helps minimize the risk of a company going out of business or experiencing catastrophic losses during natural disasters.
Having control over finances makes individuals more resilient in the face of unexpected events, improves their physical and mental health, and enables them to save for the future. This is why it’s important for everyone, whether a big bank or fintech, to build customer confidence in the industry and promote financial wellbeing. Financial service providers can do this by breaking the taboo around talking about money and educating customers on the importance of saving, investing and managing their money. It’s why we launched Talk Money Week, an annual campaign that reaches millions of people in November to encourage consumers and businesses to make better financial decisions. By building customer trust, financial services providers can drive long-term loyalty and growth. And that’s why we’re excited to see the many innovations in digital, data and automation that are shaking up the industry today.