Financial services are a massive sector of the economy that impact everyone, from individuals to corporations. It covers everything that has to do with money, from the way we save and invest to how we pay for things.
A key distinction is that a financial good is a product like a mortgage or insurance policy, while financial services are the processes involved in getting those products. For example, the bank that provides a mortgage loan might also offer home inspection and appraisal services to help people secure their property. Likewise, credit card issuers often provide fraud and identity protection services.
The financial services industry is a huge economic engine that drives global trade and investment, employs millions, and helps the average person save and achieve their goals. Its strength is a key indicator of the health of an economy, and when it weakens, it can have ripple effects on other industries and the economy as a whole.
In today’s world, established financial institutions operate as one-stop shops for all their customers’ needs. They make money by charging fees for the services they offer. This includes things like the ability to move money between accounts, which is important for consumers who want to avoid the hassle of changing banks. But the rise of digital gig work, combined with the increasing number of options to manage personal finances from your smartphone, is posing new challenges to the financial services industry. For instance, the rise of payment services such as Apple Pay and Amazon Pay is threatening to cut into interchange fees for card issuers and networks.