Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, consumer-finance firms, insurance companies and investment funds. They are important for the economy because they allow people to make more spending and saving choices.
Financial institutions like banks accept savings from those with excess cash and lend it to those who need it. This process allows them to create more capital, and they usually earn a profit on the difference between what they pay depositors and what they receive from borrowers. Other financial services include administration of payment systems such as credit and debit cards, bank drafts such as checks, and electronic fund transfers. Financial markets and the providers that facilitate stock, commodity, bond and derivative exchanges are also part of this industry.
Insurance services protect individuals and organizations against loss arising from specified events (e.g., life, health, property and legal), against the risk of default on debt or against the risk of bankruptcy. This is a critical subsector of financial services.
Ultimately, financial services allow the development of all sectors of the economy. This ensures balanced growth and provides employment opportunities to a large number of people. Many factors, however, keep a significant number of people out of the financial-services net. No single instrument or approach is likely to fill this gap, but the use of mobile and digital technologies has great potential for bringing them into the fold.