A healthy financial services sector supports a wide range of economic activities. It enables individuals to borrow for a home or car, helps businesses grow by supplying them with investment capital, and safeguards wealth and assets through insurance. It also provides millions of people with good-paying jobs, which in turn creates economic prosperity for all.
The term “financial service” encompasses many different types of business, but it is important to note that a financial good itself does not constitute a service; rather, the service element is the transaction that delivers the financial good. For example, the purchase of life insurance is a financial service that protects the beneficiaries from losing their assets when the insured person dies.
While some of these businesses focus primarily on direct savings and lending, others help channel cash from savers to borrowers and redistribute risk. For example, credit unions and banks are financial services that take deposits from savers, pool them, and then lend the money to borrowers. Banks earn revenue based on the difference between interest rates charged to borrowers and paid by depositors.
The industry also includes credit-card companies, payment processing networks, debt resolution services, and global stock exchanges. Technology has drastically changed the way these firms do business; for example, clients can check their bank accounts online at any time, and traders now use computer models to analyze markets and create investment strategies. The industry is incredibly competitive, and the pace of change is fast; new tools are introduced almost daily. As a result, people in financial services must continually sharpen their skills. Those that do well in the industry often advance quickly, since many firms promote on the basis of aptitude over tenure.
