Financial services is an industry that combines many different aspects of finance-from insurance and money management to payments and digital banking technology. It encompasses a variety of players and influencers, from credit card issuers to legacy banks to emerging challengers.
The financial services sector is an essential component of any economy and is often the driving force behind economic growth. It provides critical functions, such as facilitating transactions (exchange of goods and services), mobilizing savings, allocating capital funds to productive investment, monitoring firms and managers and mitigating risk.
A strong financial services sector ensures that consumers can afford to pay for goods and services, boosting their confidence and purchasing power. In contrast, a weak or failing system can drag down an economy and negatively impact consumer well-being.
Key services of the financial services sector include banking, mortgages, insurance, pensions and general finance. Regulatory bodies are also involved in the industry and oversee the operations of various financial institutions.
Benefits of the financial services industry
The presence of the financial services market enables the government to raise both short term and long-term funds to meet its revenue and capital expenditure needs. These funds can be raised by issuing Treasury bills to commercial banks or the sale of government securities in the capital market.
Businessmen can maximize their return on investments due to the availability of credit facilities in a reasonable rate. They can also acquire assets by availing the services of factoring, hire purchase finance and mutual funds.