Financial services are the industry sectors that support consumers, businesses and governments with their money-related needs. Think of banks, stock market brokers, credit card companies, mortgage lenders and investment agencies. But that’s not all. Financial services also include credit unions, insurance companies and other institutions that lend capital to small businesses, large corporations and even nonprofits.
These institutions act as intermediaries between savers and borrowers by accepting deposits and lending those funds to others for various purposes. They also provide depository services by offering checking and savings accounts where customers can securely store their cash. In addition, they often offer interest on these deposits.
This is the sector that includes all the activities a company or government engages in to further specific monetary goals. These activities include buying and selling products (or assets), issuing shares, taking on debt, levying taxes and so on. It’s important to note that not all members of the financial services industry are for-profit enterprises; many community-based nonprofits also play a role here, providing counseling and other money management services to local residents.
As a result of increased digitalization and the proliferation of big-tech players, financial services have become more fragmented than ever. It’s not unusual for a bank to acquire an insurance or brokerage company and keep the original brands separate, while still offering incentives for people to combine all their services with one firm. This approach is typically known as a “synergy model.” But some observers believe this is the beginning of the end for the traditional model, as these larger firms seek to gain greater control over all aspects of people’s finances.