Financial services are the business activities that support a wide range of other businesses and economic activity. They include depository institutions, such as banks and savings and loan companies; credit unions and credit cooperatives; insurance and pension funds; credit-card companies; and the providers of critical financial utilities.
The sector is vital because it creates a link between savers and borrowers and makes available a variety of funding sources. For example, the financial services sector provides money market and mutual fund products that help people invest their savings; commercial banking services such as loans and credit facilities to small and medium sized enterprises; corporate finance and capital markets services to provide debt and equity funding for mergers and acquisitions; and payment systems such as remittances, electronic funds transfer, credit and debit cards and bank drafts (like checks).
Unlike many other sectors of the economy, the growth in financial services has been powered not by consumer demand, but by the need of businesses to access funding. This has made the industry an important economic driver and a major consumer of other business services.
When we think of financial services, we tend to think about high-profile jobs like investment bankers or hedge fund managers. But financial services extends to much more than that – it includes community-based nonprofits that provide counseling and money management advice, as well as local government offices that collect taxes. It is also a powerful driver of other business sectors, influencing their practices, standards and operations.