The Importance of Financial Services

You may think of banks, mortgage lenders and stock brokers as separate entities, but these are just a few sectors in the vast financial services industry. It also includes credit card companies, insurance agencies and many more. This industry serves individuals, small businesses, large companies and even the government. Its main goal is to provide funding, and it does this through various channels such as capital markets.

When people save and borrow money, it boosts economic growth by allowing for investment and consumption. However, it can only be effective when there is a well-developed financial system to lubricate these processes. A vibrant financial market is a good barometer of an economy’s overall health. The more active a capital market is, the healthier the economy.

To help facilitate this, the financial services industry offers a wide range of products and services. Banks accept deposits and repayable funds from consumers and business and then lend them out to borrowers. This allows them to earn interest on the money they keep. They also offer checking and savings accounts, credit cards, and payment systems like electronic funds transfers and automated clearing house services.

This allows families to buy property, invest in businesses and increase their incomes. It also provides a way to pay for college tuition, purchase healthcare services and more. It can also help with emergency situations like illness and job loss. However, nearly 2 billion people worldwide lack access to financial inclusion and cannot take advantage of these benefits. Many of them store cash in their floorboards or under their mattresses – a risky and inflexible way to accumulate savings – or invest in livestock and jewelry, which is often illiquid. Without the benefit of financial services, these families miss out on opportunities to grow their assets, improve their quality of life and build resilience.

In addition to providing access to finance, financial services also reduce risk for investors and entrepreneurs by lowering the cost of capital. This is done by offering a variety of insurance products, such as life, health and property insurance. This reduces the likelihood of an unforeseen event depleting family savings or causing financial hardship.

Because of the importance of this sector, it is heavily regulated by government authorities. This ensures that financial services are provided with integrity and in the interests of the public. It also helps foster trust between savers and borrowers. This, in turn, encourages savings and production. It also makes the economy more stable and enables businesses to manage their risks. As a result, it is no surprise that jobs in the financial services industry tend to be more secure than other positions. They also tend to be more flexible and allow for a work-life balance. If you’re interested in working in the financial services sector, Pocketbook Agency can connect you to a job opportunity that is right for you. Connect with us today!