The financial services industry is a powerful economic force that influences other industries’ practices, standards, and operations. The industry includes banking, credit unions, credit card companies, insurance providers, and the broader economic services sector that includes investment firms and the redistribution of risk through investments and insurance.
The importance of financial services is reflected in its role as one of the barometers of an economy’s health. A vibrant capital market is a sign of healthy economic conditions that allow for more investment, boosting production, employment, demand, and ultimately prices. Financial services facilitate both domestic and foreign trade by providing for factors such as factoring, forfaiting, and credit cards that ensure the sale of goods in both the local and international markets.
Moreover, the financial services industry also provides the means for people to save and invest in their futures by lending money and providing mutual funds. Banks are the cornerstone of the industry, bringing together deposits from many different sources to make loans and earn revenue through fees and interest rates charged on credit and debit cards, as well as through deposit-guarantee services like cashier’s checks.
Other areas of the financial services industry include private banking, which provides wealthy individuals with a personal banker and customized investment and wealth planning. Securities research services provide information on the market to investors and traders through reports, charts, and analysis. A private equity firm or venture capital provider provides investment funding to emerging companies in exchange for a stake or profit share. Insurance services include life, property, casualty, and business insurance, as well as reinsurance, which is sold to insurers to help them cover large losses.