Financial services are the backbone of the economy and enable consumers to make large purchases and save money for unforeseen expenses. Whether it’s trading shares, providing loans or offering insurance policies; the industry plays a pivotal role in helping consumers manage risk and grow their wealth. With such a wide range of opportunities, it’s important for individuals to understand the different kinds of financial services available and how they work.
The most well-known kind of financial services is banking, which involves managing a consumer’s money and savings through checking and credit card accounts, mortgage lending, personal and student loan services, and investment portfolio management. This sector is largely comprised of for-profit banks, but also includes nonprofit community development financial institutions and some specialized government agencies.
Another major area of financial services is credit rating, which assesses the creditworthiness of individuals and companies. This is a key part of the financial services industry and allows lenders to better understand their customers and offer loans accordingly.
Other forms of financial services include the money market, which helps governments raise short-term funds by issuing Treasury bills and long-term funds by selling bonds in the securities market. This helps maintain a stable supply of funds for the government to meet both its operating and capital expenditures. It also helps businesses manage risks by matching them with investors through the capital markets, as well as by creating a proper framework for financial planning and regulation.