Financial services are economic services that are provided by the financial industry. This industry consists of a variety of businesses, including banks, credit-card companies, and credit unions. Some of these services include loans and investments. Other services include debt management and insurance. Regardless of their form, these services are vital for a growing society.
The financial services industry is a highly competitive space. While traditional financial institutions face many challenges, they must keep pace with consumer expectations or risk being replaced by more innovative competitors. There are two main segments of the industry – consumer/consumer financial services and corporate financial services. While many companies offer both types of services, some concentrate on one or the other. In addition, many nontraditional banks have emerged to capture a share of the market. They are offering innovative services, such as user-friendly apps and reduced overdraft fees.
Financial services help increase the productivity and profitability of businesses. They enable companies to diversify their businesses by offering financing, investments, and insurance. This helps companies increase their domestic sales and exports. It also helps promote the economy through the use of the stock market and derivative markets. Financial services ensure that funds flow to all sectors of the economy, which is essential for a balanced economy.
Financial services providers channel cash from savers to borrowers. This helps redistribute risks and can provide value to investors. They can also monitor and manage investments, pool cash, and reduce risk for individual members. Banks and credit unions also offer financial products to their customers, such as mortgages and other loans. By the 1990s, the lines between financial services companies became blurred as mergers and acquisitions occurred.