The financial services industry is a vital part of any economy, but it also plays a huge role in shaping the practices, standards and regulations that all other industries adopt. This is because almost every business uses a financial service at some point in their operations. Whether it is credit cards, bank accounts or insurance coverage, all of these things fall under the category of financial services.
Financial market utilities include stock exchanges, clearing houses and derivatives markets, as well as payment systems like real-time gross settlement systems or interbank networks. They also provide credit reference and analysis, investment and portfolio research and advice and advisory services for corporate restructuring and strategy.
Banking services are the foundation of the financial services sector. These services include deposit-taking (accepting checks or other forms of cash from customers); lending of all types, such as consumer, commercial and mortgage; money market operations (such as foreign exchange trading); and custodial, depository and trust services.
The growth of this industry has been driven by increased household savings, the rise in purchasing power of consumers and the increase in the number of businesses. This has led to more investment opportunities. It has also facilitated the consolidation of larger banks through mergers and acquisitions. The removal of barriers to entry in this sector, such as the Glass-Steagall Act in the 1990s, has also allowed for more multi-service financial conglomerates to emerge.
For many people, the ability to access financial services is key to a better life. The ability to borrow and save, for example, helps individuals and families take on new projects and invest in themselves and their communities. For those living in poverty, access to finance can mean the difference between being able to improve their livelihood and being trapped in a cycle of debt.