The financial services industry includes a diverse array of companies that offer a wide range of products and services to individuals, businesses, and organizations. This sector includes banks, investment houses, insurance companies, credit-card and consumer finance companies, as well as housing and mortgage lenders. The growth of the financial services industry is crucial to the overall health of a nation’s economy. The sector helps individuals and businesses manage their money by promoting savings, providing loans and investing funds.
The role of the financial services industry is to provide channels for transferring cash from those who have it to those who need it. For example, banks accept deposits from depositors and then lend the funds to borrowers, making a profit on the difference between what they pay depositors and what they receive from borrowers. Insurance companies pool cash from many policyholders and then invest it on behalf of their clients. The goal is to generate returns while reducing risk for individual policyholders.
Other services provided by the financial services industry include administering payment systems, which includes credit and debit cards as well as bank drafts like checks. Many of these companies also offer rewards programs to encourage customers to use their services. Finally, some financial services companies specialize in underwriting debt or equity for corporations looking to raise capital. Others help individuals with complex investments by constructing intricate products such as private equity or mutual funds. Still others facilitate the mergers and acquisitions of large companies by underwriting them.