While many people think of credit cards, mortgages and Wall Street when they hear the term financial services, it actually covers much more. The industry includes everything that touches money, from small community banks to large corporations to nonprofits and government agencies. It also encompasses many different kinds of businesses, such as insurance companies, securities traders, investment firms, and financial advisors.
Financial services providers help people make wise decisions about saving, spending and borrowing. They are a vital part of our economy and society, providing millions of Americans with loans and mortgages to purchase goods and services and helping them save for retirement and other goals. They safeguard property and health through insurance, and they enable businesses to grow by investing capital.
Most of the services offered by the financial sector are provided by for-profit enterprises, although there are a number of nonprofits that offer some counseling or money management advice. As technology evolves, it opens new doors for the industry and its consumers. For example, it’s now easier for consumers to use digital tools to manage their finances, and a variety of fintechs are focusing on helping individuals with debt and basic money management.
Financial services are divided into four main categories: credit, consumer finance, investments and insurance. A good understanding of each of these is important to understand the overall picture. While the financial services industry is incredibly complex and encompasses many different kinds of companies, most of them specialize in one of these categories. However, some are known as conglomerates and operate in multiple sectors of the market e.g., a bank that offers both investment banking and commercial banking.