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Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including
credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including deposit accounts, provision ...
s,
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...
s, credit-card companies,
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
companies,
accountancy Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
companies, consumer-finance companies, stock brokerages, investment funds, individual asset managers, and some
government-sponsored enterprise A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy, to make those segments of th ...
s.


History

The term "financial services" became more prevalent in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., federal district, five ma ...
partly as a result of the GrammLeachBliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. Companies usually have two distinct approaches to this new type of business. One approach would be a bank that simply buys an insurance company or an
investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
, keeps the original
brand A brand is a name, term, design, symbol or any other feature that distinguishes one seller's good or service from those of other sellers. Brands are used in business, marketing, and advertising for recognition and, importantly, to create a ...
s of the acquired firm, and adds the
acquisition Acquisition may refer to: * Takeover, the purchase of one company by another * Mergers and acquisitions, transactions in which the ownership of companies or their operating units are transferred or consolidated with other entities * Procurement, ...
to its
holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
simply to diversify its earnings. Outside the U.S. (e.g. Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent and has its own customers, etc. In the other style, a bank would simply create its own insurance division or brokerage division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.


Relationship to the government

The financial sector is traditionally among those to receive government support in times of widespread economic crisis. Such bailouts, however, enjoy less public support than those for other industries.


Banks


Commercial banking services

A commercial bank is what is commonly referred to as simply a bank. The term " commercial" is used to distinguish it from an
investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
, a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or
share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capit ...
(equity). The primary operations of commercial banks include: * Keeping money
safe A safe (also called a strongbox or coffer) is a secure Lock (security device), lockable box used for securing valuable objects against theft or fire. A safe is usually a hollow cuboid or cylinder, with one face being removable or hinged to form ...
while also allowing withdrawals when needed * Issuance of chequebooks so that bills can be paid and other kinds of payments can be delivered by the post * Provide personal loans, commercial loans, and
mortgage loan A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...
s (typically loans to purchase a home, property or business) * Issuance of
credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...
s and processing of credit card transactions and billing * Issuance of debit cards for use as a substitute for
cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The pers ...
s * Allow financial transactions at branches or by using
automatic teller machine An automated teller machine (ATM) or cash machine (in British English) is an electronic telecommunications device that enables customers of financial institutions to perform financial transactions, such as cash withdrawals, deposits, fund ...
s (ATMs) * Provide wire transfers of funds and
electronic fund transfer Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of b ...
s between banks * Facilitation of standing orders and direct debits, so payments for bills can be made automatically * Provide overdraft agreements for the temporary advancement of the bank's own money to meet the monthly spending commitments of a customer in their current account. * Provide
internet banking Online banking, also known as internet banking, web banking or home banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial inst ...
system to facilitate the customers to view and operate their respective accounts through the internet. * Provide charge card advances of the bank's own money for customers wishing to settle credit advances monthly. * Provide a check guaranteed by the bank itself and prepaid by the customer, such as a cashier's check or
certified check A certified check (or certified cheque) is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's ...
. *
Notary A notary is a person authorised to perform acts in legal affairs, in particular witnessing signatures on documents. The form that the notarial profession takes varies with local legal systems. A notary, while a legal professional, is disti ...
service for financial and other documents * Accepting the deposits from customers and providing credit facilities to them. * Sell investment products like mutual funds Etc. The United States is the largest location for commercial banking services.


Investment banking services

*
Underwriting Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabili ...
debt and equity for the private and public sector for such entities to raise capital. * Mergers and acquisitions – Work to underwrite and advise companies on mergers or takeovers. * Structured finance – Develop intricate (typically derivative) products for high net worth individuals and institutions with more intricate financial needs. *
Restructuring Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons ...
– Assist in financially reorganizing companies *
Investment management Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be instit ...
– Management of assets (e.g., real estate) to meet specified investment goals of clients. * Securities research – Maintain their own department that services to assist their traders, clients and maintain a public stance on specific securities and industries. *
Broker A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be con ...
Services – Buy and sell securities on behalf of their clients (sometimes may involve financial consulting as well). *
Prime brokerage Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest ...
– An exclusive type of bundled broker service specifically meant to service the needs of hedge funds. * Private banking – Private banks provide banking services exclusively to
high-net-worth individual High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible wealth (assets such as stocks and bonds) exceeds a given amount. Typically, these individuals are define ...
s. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking service. New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in London
international business International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. It involves cross-border transactions of goods and services between two or mor ...
and commerce make up a significant portion of investment banking activity.


Foreign exchange services

FX or Foreign exchange services are provided by many banks and specialists
foreign exchange brokers The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspe ...
around the world. Foreign exchange services include: * Currency exchange – where clients can purchase and sell foreign currency banknotes. * Wire transfer – where clients can send funds to international banks abroad. * Remittance – where clients that are migrant workers send money back to their home country. London handled 36.7% of
global currency In international finance, a world currency, supranational currency, or global currency is a currency that would be transacted internationally, with no set borders. History First European Banknotes (17th century) The first European banknotes we ...
transactions – an average daily turnover of US$1.85 trillion – with more US dollars traded in London than New York, and more
Euros The euro (symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . Th ...
traded than in every other city in Europe combined.


Investment services

* Collective investment fund – A fund that acts as an investment pool so investors can put money into a fund that will reinvest it into a variety of securities based upon their common, outlined investment goal. *Investment Advisory Offices – Run by registered investment advisors who advise clients in financial planning and invest their money. * Hedge fund management – Hedge funds often employ the services of "
prime brokerage Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest ...
" divisions at major investment banks to execute their trades. * Private equity – Private equity funds are typically closed-end funds, which usually take controlling equity stakes in businesses that are either private or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets. *
Venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
– Private equity capital typically provided by professional, outside investors to new, high-growth-potential companies in the interest of taking the company to an IPO or trade sale of the business. Startup companies are typically fueled by an angel investor. * Family office – Investment and wealth management firm that handles a wealthy family or small group of wealthy individuals with financial plans tailored to their needs. Similar to private banking. *Advisory services – These firms (or departments within a larger entity) service clients with financial advisers who serve as both, a broker as well as a financial consultant. * Custody services – the safe-keeping and processing of the world's securities trades and servicing the associated portfolios. Assets under custody in the world are approximately US$100 trillion. New York City is the largest center of investment services, followed by London.


Insurance

*Insurance brokerage – Insurance brokers shop for insurance (generally corporate property and casualty insurance) on behalf of customers. Recently several websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry. *Insurance underwriting – Personal lines insurance
underwriter Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabili ...
s actually underwrite insurance for individuals, a service still offered primarily through agents, insurance brokers, and
stock broker A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks ...
s. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and annuities,
life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...
, retirement insurance, health insurance, and
property insurance Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or ...
and casualty insurance. *Finance and insurance – a service still offered primarily at asset dealerships. The F&I manager encompasses the financing and insuring of the asset which is sold by the dealer. F&I is often called "the second gross" in dealerships that have adopted the model *
Reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own ins ...
– Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses. The United States, followed by Japan and the United Kingdom are the largest insurance markets in the world.


Other financial services

*Angel investment networks – A group of angel investors can create their own network to be the financial foundation for future companies. *Credit card networking – Companies that serve as the bridge between the retailers and the banks who issue the bank cards. Major credit card networks are: UnionPay, Mastercard, Visa Inc., Rupay,
American Express American Express Company (Amex) is an American multinational corporation specialized in payment card services headquartered at 200 Vesey Street in the Battery Park City neighborhood of Lower Manhattan in New York City. The company was found ...
and
Discover Financial Discover Financial Services is an American financial services company that owns and operates Discover Bank, which offers checking and savings accounts, personal loans, home equity loans, student loans and credit cards. It also owns and ope ...
. *
Conglomerate Conglomerate or conglomeration may refer to: * Conglomerate (company) * Conglomerate (geology) * Conglomerate (mathematics) In popular culture: * The Conglomerate (American group), a production crew and musical group founded by Busta Rhymes ** Co ...
s – A financial services company, such as a
universal bank A universal bank participates in many kinds of banking activities and is both a commercial bank and an investment bank as well as providing other financial services such as insurance.retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated. As a consequence,
economic capital In finance, mainly for financial services firms, economic capital (ecap) is the amount of risk capital, assessed on a realistic basis, which a firm requires to cover the risks that it is running or collecting as a going concern, such as market r ...
for a conglomerate is usually substantially less than
economic capital In finance, mainly for financial services firms, economic capital (ecap) is the amount of risk capital, assessed on a realistic basis, which a firm requires to cover the risks that it is running or collecting as a going concern, such as market r ...
is for the sum of its parts. * Debt resolution – A consumer service that assists individuals that have too much debt to pay off as requested, but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards, or in some cases merchant accounts. *Financial market utilities – Organizations that are part of the infrastructure of financial services, such as
stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for th ...
s, clearing houses, derivative and commodity exchanges and payment systems such as
real-time gross settlement Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a "real-time" and on a " gross" basis. Settlement in "real time" means a payme ...
systems or
interbank network An interbank network, also known as an ATM consortium or ATM network, is a computer network that enables ATM cards issued by a financial institution that is a member of the network to be used to perform ATM transactions through ATMs that belo ...
s. *Payment recovery – Assistance in recovering money inadvertently paid to vendors by businesses, such as by accidental duplicate payment of an invoice or failure to return a deposit.


Financial exports

A financial export is a financial service provided by a domestic firm (regardless of ownership) to a foreign firm or individual. While financial services such as banking, insurance, and investment management are often seen as domestic services, an increasing proportion of financial services are now being handled abroad, in other
financial centre A financial centre ( BE), financial center ( AE), or financial hub, is a location with a concentration of participants in banking, asset management Asset management is a systematic approach to the governance and realization of value from th ...
s, for a variety of reasons. Some smaller financial centres, such as
Bermuda ) , anthem = " God Save the King" , song_type = National song , song = "Hail to Bermuda" , image_map = , map_caption = , image_map2 = , mapsize2 = , map_caption2 = , subdivision_type = Sovereign state , subdivision_name = , ...
,
Luxembourg Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small land ...
, and the Cayman Islands, lack sufficient size for a domestic financial services sector and have developed a role providing services to non-residents as
offshore financial centre An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy." "Offshore" does not refer ...
s. The increasing competitiveness of financial services has meant that some countries, such as Japan, which were once self-sufficient, have increasingly imported financial services. The leading financial exporter, in terms of exports less imports, is the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
, which had $95 billion of financial exports in 2014. The UK's position is helped by both unique institutions (such as
Lloyd's of London Lloyd's of London, generally known simply as Lloyd's, is an insurance and reinsurance market located in London, England. Unlike most of its competitors in the industry, it is not an insurance company; rather, Lloyd's is a corporate body gove ...
for insurance, the Baltic Exchange for shipping etc.) and an environment that attracts foreign firms; many international corporations have global or regional headquarters in the
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
and are listed on the
London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pa ...
, and many banks and other financial institutions operate there or in
Edinburgh Edinburgh ( ; gd, Dùn Èideann ) is the capital city of Scotland and one of its 32 Council areas of Scotland, council areas. Historically part of the county of Midlothian (interchangeably Edinburghshire before 1921), it is located in Lothian ...
.


See also

* Alternative financial services *
Financial analyst A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job. The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, o ...
*
Financial crime Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud ( cheque fraud, credit card ...
* Financial data vendors * Financial markets * Financial technology *
Financialization Financialization (or financialisation in British English) is a term sometimes used to describe the development of financial capitalism during the period from 1980 to present, in which debt-to-equity ratios increased and financial services acc ...
* Insider threat *
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster gl ...
* List of banks * List of investment banks *
List of countries by share of population with access to financial services The following list ranks countries by the share of population with access to financial services. Access to financial services is defined as the share of the adult population with an account ownership at a financial institution or with a mobile-mo ...
* List of largest financial services companies by revenue *


References


Further reading

*


External links


The role of the Financial Services Sector in Expanding Economic Opportunity , A report by Christopher N. Sutton and Beth Jenkins , John F. Kennedy School of Government , Harvard University
{{DEFAULTSORT:Financial Services Financial markets