Types of Financial Services
Financial services include all the activities that help individuals, businesses and governments manage their money. It involves providing financial tools that allow people to save, spend and invest their money in a safe way. A healthy financial sector helps the economy to grow and provides a safety net for individuals by offering insurance.
Whether it is banking, insurance or investments, financial services are an integral part of the economic system. Some of the main types of financial services include:
Deposit-taking, lending (including mortgage lending) and investment services; securities trading, market making, financial leasing and custodial, depository and trust services; and payment and money transmission services. Some financial service providers offer a combination of some of these services, such as banks that provide both deposits and loans to consumers and businesses.
Another type of financial service provider is a brokerage firm that buys and sells securities on behalf of its clients and receives a commission for each transaction. Other financial service providers specialize in one area of the industry, such as providing credit reference and analysis, or asset management. Finally, some financial service companies are conglomerates that have businesses in several different sectors of the industry. This allows them to diversify their risk and take advantage of economies of scale. This is also helpful if there are fluctuations in the industry’s regulatory environment, as it reduces their exposure to specific risks. This makes it less likely that they will have to close down a business segment when it becomes vulnerable.