The financial services industry encompasses a broad range of businesses, including banking, investment management and insurance. A bank may offer checking and savings accounts, a loan association might provide mortgages and credit cards, and brokerage firms may invest in stocks, bonds and mutual funds.
The industry has evolved from a sector that more or less stuck to its specialty in the 1970s to one that is nearly all-encompassing today, especially when considering the role of technology. With the advancement of electronic payments, banking and lending are becoming more streamlined and efficient, making them more profitable for banks.
Financial services are a crucial part of any economic development. They are necessary to enable people to earn more money and improve their standard of living.
They also promote production, savings and investment in the economy. They encourage producers to expand their activities by providing credit at a reasonable rate. This in turn leads to more sales and increases in demand, employment, income and prices.
Similarly, the presence of financial services ensures promotion of domestic as well as foreign trade. It enables consumers to acquire essential and luxury goods through hire purchase, leasing and housing finance companies.
The development of all the sectors in a country is a sign of its economic growth. It also ensures a balanced distribution of funds to each sector so that the primary, secondary and tertiary sectors contribute equally to the economy.