Financial services include all the businesses and professionals who provide money-related products and services. They help consumers save and invest, pay for things like mortgages and car loans, and protect people and property against risk. They are also important to a country’s economy because they facilitate the flow of money from those with cash to those who need it to buy goods and services.
Intermediation is what financial services do: They channel cash from savers to borrowers and redistribute risk. This is why it’s so important for countries to have a stable system of financial services. Ideally, they want to strike a balance between enough regulation to keep consumers’ rights and assets safe, and not too much to squash the creative new ideas that are constantly being produced by financial services companies.
For example, angel investors and private equity firms supply investment capital to startups and small businesses in exchange for ownership stakes or profit participation. This is a form of risk diversification that’s especially helpful to technology companies. Debt resolution services, which negotiate with creditors on behalf of their clients, are also part of the financial services industry. So are global payment service providers, such as Visa and MasterCard, which facilitate credit card and debit card transactions in exchange for a percentage of the sale.
All of these services are a critical component of a healthy world economy, which is why the industry is so regulated. As the world’s economy continues to grow more complex, there is a need for more financial professionals who can assist with saving and investing, borrowing and lending, and protecting wealth.