Financial services are the businesses that create, maintain, and manage the flow of money. These firms enable individuals and companies to invest in projects, expand their operations, and make purchases. Financial institutions also help consumers by offering loans and credit cards. Financial services firms make profits by charging fees and earning interest on assets. They also help a country grow economically by promoting investment, production, and saving.
This industry includes banking, insurance, securities, investments, and more. Banks take in deposits, pool them, and then lend them out to those who need the funds. The Gramm-Leach-Bliley Act consolidated many different types of finance into one industry in the 1990s, and this allowed large banks to offer a full range of investment, commercial, and financial services. The banking sector was a major contributor to the housing bubble that almost collapsed the economy in 2008.
Investment firms offer stocks and bonds to investors. They also provide advisory services, like advising corporations on mergers and acquisitions. The insurance sector includes both life and property insurance, as well as reinsurance (insurance sold to insurers themselves to protect against catastrophic losses).
Other financial services include financial markets utilities—the exchanges that facilitate stock, derivative, and commodity trades—and payment systems such as global money transfers and credit card networks. These industries also oversee investor protection, credit reporting, and data processing. These firms are often heavily regulated by independent agencies to ensure transparency and consumer protection. They must also keep up with cybersecurity trends to prevent data breaches.