Financial services are the processes by which businesses and consumers obtain economic goods. These include payment processing providers like credit card companies, debit cards, and electronic money transfers; global exchanges for commodities, stocks, and bonds; and debt-resolution services. Additionally, the industry encompasses banking and investment firms, insurance agencies, and other providers of services that manage risk for their clients. Banks, for example, help channel cash from savers to borrowers and redistribute risk by aggregating deposits and monitoring investments. Insurance agencies pool cash from a large number of policy holders so that they are not crippled should one or two default on their loans.
A strong financial services sector is vital for the health of a nation’s economy. It allows people to make more purchases with the money they earn and save, and it helps small businesses grow into larger corporations that can provide more jobs. However, a crisis in the financial services sector can bring an entire economy down, leading to recession and even depression. Therefore, it is important for governments to regulate the industry to ensure its stability.