Key Functions of Financial Services
Financial services are economic services provided by the finance industry, which encompasses a broad range of service sector firms that provide financial management, including credit unions, banks, insurance companies and investment banks. They channel cash from savers to borrowers, redistribute risk, and add value through investment management and securities trading. They also administer payment systems, and facilitate transactions and settlement of accounts through credit and debit cards and bank drafts such as checks, electronic funds transfers and other means.
Financial institutions offer investment services to individuals and businesses to help them grow their wealth. They offer a wide variety of investment products such as mutual funds, stocks and bonds. They also provide advisory services to assist clients in making informed investment decisions.
Another key function of financial services is to provide capital to the primary, secondary and tertiary sectors of the economy. This enables the companies to boost production and eventually reap profits. A vibrant capital market is one of the barometers of a healthy economy.
Financial services also play a critical role in promoting the welfare of society by providing protection against financial risks such as death (life and health insurance), property loss or damage (home and auto insurance) and liability in case of accident or mishaps (property and casualty insurance). This is done through the establishment of insurance companies that issue policies and settle claims. They are regulated by the government to ensure fairness and transparency in their operations.