When you think about the financial services industry, you probably envision banks, stock brokers and mortgage lenders. However, the industry is much bigger than that, and includes a wide variety of professional firms that manage money. These include debt resolution services, global payment providers such as Visa and MasterCard, credit card machine networks and even accounting service companies. The sector also includes insurance companies and investment bankers.
The heart of the financial services industry is comprised of institutions that collect savings, pool them and lend them to individuals and businesses. This includes deposit-taking, lending of all types, and asset management (including investment and pension fund management). Other parts of the industry include credit-reporting agencies; debt resolution services; international money transfers; payment systems; and accounting, actuarial, intermediation and other auxiliary financial services.
Many people around the world lack access to financial services, which prevents them from saving for a rainy day or buying a home or car. This is especially true in developing and emerging markets. A lack of access to these services can lead to economic instability, as households and small businesses struggle to meet recurring expenses.
The financial services industry is important to the economy because it enables consumers to put their money to productive use, instead of just stashing it under their mattress or letting it sit in a checking account earning little interest. It also provides a safety net for those unexpected events that can devastate a household’s budget, such as an extended illness or a natural disaster.