The financial services sector is an industry that encompasses a wide range of professional firms that manage the money and investment portfolios of individuals, companies, and institutions. The sector is comprised of banks, credit unions, insurance agencies, credit-card companies, and mortgage lenders. It is also home to payment and settlement firms like Visa and American Express, which offer credit cards and other remittance solutions. Financial services companies are also known for offering wealth management and retirement planning advice.
Most people are familiar with the concept of insurance, which provides protection against unforeseen events and losses. Financial services companies also help consumers invest in the stock market, by offering mutual funds and brokerage services. They also help manage debt by providing consolidation and debt resolution options for people who are struggling with outstanding loans.
In addition to investing, a financial service company can provide depository services by collecting deposits and lending them out to individuals and businesses. For example, a bank collects deposits in the form of checking and savings accounts and then lends those funds out to individuals who want to start a business or purchase a home. In doing so, the bank earns interest on the money it has deposited.
The financial services industry also provides consumer finance, which helps consumers afford products and services through installment payments. This includes credit card and mortgage services, as well as personal and student loan services. This industry is regulated at the national level, and its development is closely tied to the health of a country’s economy. For example, if an industry is experiencing a slump, financial institutions may extend a selective credit line to those in the affected sector with lower interest rates.