Whether you’re investing in a company or saving money for a rainy day, the financial services industry helps move funds around. It’s a diverse field that includes everything from banks to credit card companies to insurance agencies. It’s not uncommon for businesses to specialize in a particular area of the financial services industry, but it wasn’t always that way. For example, in the past, banks focused on depositing customers’ checking and savings accounts while lending them mortgages or business loans.
Today, a bank might offer checking and savings accounts along with mortgages, business loans and other credit products. Financial services also encompasses the critical utilities that support these operations, such as stock exchanges and clearing houses, derivative and commodity exchanges, and payment systems like real-time gross settlement systems and interbank networks.
In addition to these core functions, the financial services industry offers investment and advisory services for individuals and corporations. For example, investment banking firms provide access to capital markets through securities trading and underwriting. Advisory and wealth management services help investors make informed decisions about their financial investments.
It might seem obvious that a mortgage and an insurance policy are both financial services, but it’s important to distinguish between the two. A financial good is an object you possess, like a house or an automobile, and a financial service is what supports it. For example, the purchase of a home involves getting a mortgage, insuring it and obtaining inspections and appraisals—all considered financial services.