Managing and exchanging money is at the heart of financial services, which encompasses a wide range of business sectors. These include banks, credit unions, credit card companies, credit-card networks, and global payment services such as Visa and Mastercard. Other subsectors of financial services include mortgage lenders, insurance companies and investment firms.
These businesses are all connected and interact, forming a dynamic whole that makes it possible for people to make investments in real estate, commodities, loans, securities, stock, mutual funds, and other products. A strong financial services sector contributes to a country’s economic growth and development by encouraging production, savings, and investing.
Before the 1970s, the lines between different financial service sectors were more distinct. Banks offered checking and savings accounts, while loan associations specialized in mortgages. As consumers demanded more from their banks, the lines began to blur and banks diversified their offerings. In the 1990s, some even merged to offer more products, like credit cards and mortgages.
Regulatory bodies also exist to ensure that the various players in the industry act responsibly and follow the law. This is especially important in a market as large as the one for financial services. For example, if a bank is found to have mistreated its customers, it can face fines or even shutdown. Having an effective regulator is vital to the success of this industry. A good one protects the interests of the consumer, promotes transparency, and maintains a level playing field.