Financial services is the industry that provides all of the underlying infrastructure that supports and facilitates other industries, like banking, investments and insurance. It’s a wide umbrella that encompasses thousands of depository institutions, providers of investment products, insurance companies and credit and financing organizations. It also includes the critical utilities, like clearing and settlement, and other infrastructure supporting these firms.
The most visible aspect of the financial services industry is banks and credit unions that offer a range of deposit, lending, and investment services. These companies are essentially middlemen between savers (who supply the bank with their money) and borrowers (who receive loans and credit). Other members of this industry include investment agencies, stock market brokers and even credit card companies like Visa and MasterCard.
Technology has had a huge impact on how these firms operate. The internet, for example, has allowed clients to check their bank accounts at any time, and it’s made it much easier for companies to pay employees through direct deposit. Computer technology is also used by these firms to analyze markets and create investment strategies.
The financial services industry faces a number of challenges. One of the most significant is that customers have less understanding of debt and basic money management. This lack of awareness can negatively affect customer retention and acquisition, especially as it relates to digital offerings. Another challenge is that new competitors are launching innovative tools and services, threatening traditional companies’ market share.