Financial services are one of the key sectors that drive an economy. They help individuals borrow, spend, save and invest money securely. They also ensure that businesses have access to capital for expansion and operations. Moreover, they make it possible for the masses to get basic essentials like food, housing and healthcare.
The industry is dominated by banks, credit unions, insurance companies, stock brokerage firms and other entities that provide investment products. It also includes credit-card companies and global payment systems. Financial services firms make money by charging fees to depositors and by investing those funds. They are often heavily regulated, which can limit their ability to innovate and compete.
While some people think of Wall Street when they hear the term “financial services,” the industry is much more complex than brokers and trading platforms. The sector is comprised of thousands of entities including depository institutions, providers of investments, insurance companies and other credit and financing organizations. It also includes global payment services, credit-card companies and the organizations that run stock, bond and commodity exchanges.
The growth of financial services is largely driven by the demand for products and services that support investment, savings and production. Financial institutions that earn profits promote savings and reinvest them, which generates more production, employment, income, demand and prices. In turn, this boosts the income of consumers and raises living standards. Financial services also help to develop backward regions, which are often less developed than the rest of a country.