The financial services industry is a vast collection of businesses that manage money. It includes credit unions, banks, credit-card companies, investment firms and insurance companies. The industry also comprises of companies that provide accountancy services, consumer-finance companies, stock brokerages and individual managers. Financial services are important to the economy because they mobilize savings and investments and provide a means for businesses to grow. However, the industry has some problems that need to be addressed in order to thrive.
It was once the case that each sector of the financial services industry stayed in its own niche. Banks offered checking and savings accounts, mortgage and loan associations provided loans, while brokerage companies offered investment opportunities in stocks and bonds. Credit card companies like Visa and Mastercard provided credit cards. But by the 1970s, consumers began to demand more from their financial institutions. They wanted more than just a place to save and invest their money. Banks began to offer more products, and other financial services companies started to merge with or acquire them.
Today, it’s difficult to tell where one financial service ends and another begins. Credit-card companies are now offering checking and savings accounts, and even investment options like mutual funds. Banks have gotten into the mortgage and loan business, while brokerage companies have merged with or acquired many of their competitors. These mergers have created a more consolidated market, making it harder for smaller, independent companies to compete.
The industry is also affected by changing consumer attitudes about the role of financial services in their lives. There is a growing awareness that financial well-being is just as important as physical and mental health. People who feel in control of their finances are more resilient in the face of unexpected events and have more money left over to save for the future. The financial services industry is working hard to deliver on this vision, but it needs to do more to make its products and services accessible to the people who need them most.
To thrive, the financial services industry must keep pace with changes in technology, customer expectations and regulatory requirements. Keeping up with the competition is challenging, but it’s crucial to the long-term success of this vital industry. To do so, it’s important to understand what makes up the four major categories of financial services: