When we think about the financial services industry, we typically think about banks, brokerage firms and mortgage lenders. But in reality, the industry is much broader than that. It includes all companies, large and small, that provide investors, consumers and businesses with the services they need to manage their money. That includes everything from depositing your paycheck at the bank to investing in mutual funds and getting a loan to buy a home or car to insurance policies that protect you against liability.
Before the 1970s, each sector of the industry more or less stuck to its own specialty. For example, banks offered checking and savings accounts, while credit unions provided loans like mortgages. But then the industry started merging and expanding. As a result, many companies now offer multiple types of financial services, from mutual funds and factoring to credit cards and merchant account management.
While it might seem that the financial services industry is becoming more and more crowded, it’s important to remember that it provides an essential service to consumers. Without it, consumers and businesses would have a hard time saving for big purchases or growing their money over time. And that could have a serious impact on the economy as a whole.
A healthy financial services industry also allows families to invest in their future by purchasing land, constructing or improving homes and even buying livestock and consumer durables. In addition, it enables them to secure jobs and provide for their children’s education and retirement. And it gives businesses the capital they need to operate and grow.