Financial services are the businesses that manage money and provide credit, investment, insurance, and other related transactions. This sector of the economy is crucial to both individuals and businesses because it allows people to make large purchases, save for the future, and minimize risk by diversifying assets. It also helps support the growth of other sectors in the economy. Without it, companies may not be able to grow as quickly or expand into new markets.
One of the most important financial service providers is the banking industry. Banks act as intermediaries between savers and borrowers by accepting deposits (money that is owed to someone) and lending it out for different purposes. They offer services such as checking and savings accounts, loan origination, and money market funds. They also offer payment services by issuing credit and debit cards and providing check clearing and settlement services. They also provide securities trading and underwriting services.
Other financial services include credit unions and mutual funds. Credit unions offer deposit and lending services while mutual funds are pools of investments that are managed by professional managers. They are popular among people who want to invest in the stock market but do not have enough capital to purchase individual stocks.
Other providers of financial services include insurance companies and credit-card issuers. Insurance provides protection against unforeseen events, such as death or disability. Credit-card issuers help consumers finance major purchases by allowing them to pay for them over time with interest.