Financial services encompass all the activities that help people manage money, such as depositing or withdrawing it. They also include services that help companies raise funds, such as investment banks. Other services are less obvious but just as important, such as issuing credit cards and transferring money electronically. In addition, they include debt resolution services, global payment networks and currency exchange offices.
The most basic definition of financial services is “everything that touches money,” and this includes the entire spectrum of businesses, from the large, multinational corporations to small community banks. It also includes not-for-profit ventures such as credit counseling and money management advice organizations.
There are three broad categories of financial services: depository, credit and lending and asset management. Depository services include checking and savings accounts, which provide a place to securely store funds and earn interest. Credit services include mortgages and credit card loans, which are extended to individuals based on their ability to repay the debt. Lending services are provided by private and public financial institutions that extend funds to borrowers for business purposes or personal consumption. Asset management firms handle investments, such as stocks and bonds, mutual funds, hedge funds and insurance assets.
The presence of financial services promotes economic dynamism in the primary, secondary and tertiary sector by providing finance for them. It also helps to improve the standard of living of people by making it possible for them to purchase goods and services through hire purchase, leasing and housing finance institutions.