Financial services
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Financial services are the economic services provided by the
finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption (economics) ...
industry, which encompasses a broad range of
business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...
es that manage money, including credit unions,
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. Beca ...
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 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 (finance), credit to targeted sectors of the economy, to make tho ...
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 Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
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 an ...
s of the acquired firm, and adds the acquisition 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 Earnings are the net benefits of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law ...
. Outside the U.S. (e.g.
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
), 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 Commercial may refer to: * a dose of advertising conveyed through media (such as - for example - radio or television) ** Radio advertisement ** Television advertisement * (adjective for:) commerce, a system of voluntary exchange of products and s ...
" 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 Shareholders' equity, equity that has been derived by the issue of Share (finance), shares in the corporation to a shareh ...
(equity). The primary operations of commercial banks include: * Keeping money safe 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 (legal system), 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 ...
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 credit card issuer, card issuer to pay them for the ...
s and processing of credit card transactions and billing * Issuance of
debit card A debit card, also known as a check card or bank card is a payment card that can be used in place of cash to make purchases. The term ''#Plastic card, plastic card'' includes the above and as an identity document. These are similar to a credi ...
s for use as a substitute for cheques * Allow financial transactions at branches or by using automatic teller machines (ATMs) * Provide wire transfers of funds and electronic fund transfers 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 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. * Notary 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 liabil ...
debt and equity for the private and public sector for such entities to raise capital. *
Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of Company, companies, other business organizations, or their operating units are transferred to or Consolidation (business), consolidated with another company or b ...
– Work to underwrite and advise companies on mergers or takeovers. *
Structured finance Structured finance is a sector of finance - specifically financial law - that manages Leverage (finance), leverage and Financial risk, risk. Strategies may involve legal and corporate restructuring, off balance sheet accounting, or the use of fin ...
– Develop intricate (typically derivative) products for high net worth individuals and institutions with more intricate financial needs. * Restructuring – Assist in financially reorganizing companies *
Investment management Investment management is the professional asset management of various Security (finance), securities, including shareholdings, Bond (finance), bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of inv ...
– 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 Purchasing, buyer and a sales, seller for a commission (remuneration), commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a :wikt:princip ...
Services – Buy and sell securities on behalf of their clients (sometimes may involve financial consulting as well). * Prime brokerage – An exclusive type of bundled broker service specifically meant to service the needs of hedge funds. *
Private banking Private banking is banking, investment and other financial services provided by banks and financial institutions primarily serving high-net-worth individuals (HNWIs)—defined as those with very high levels of income or sizable assets. A bank that ...
– Private banks provide banking services exclusively to high-net-worth individuals. 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 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 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 transactions – an average daily turnover of US$1.85 trillion – with more US dollars traded in London than New York, and more Euros 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" divisions at major investment banks to execute their trades. *
Private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a typ ...
– 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 An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses Startup company, start-up, usually in exchange for convertibl ...
. * 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 Private banking is banking, investment and other financial services provided by banks and financial institutions primarily serving high-net-worth individuals (HNWIs)—defined as those with very high levels of income or sizable assets. A bank that ...
. *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 underwriters actually underwrite insurance for individuals, a service still offered primarily through agents, insurance brokers, and stock brokers. 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 insurance , insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon ...
, retirement insurance,
health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
, and property insurance 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 insu ...
– 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 RuPay ''(portmanteau of Rupee and Payment)'' is an Indian multinational corporation, multinational financial services and payment system, payment service system, conceived and launched by the National Payments Corporation of India (NPCI) on 26 ...
, American Express and Discover Financial. * Conglomerates – A financial services company, such as a universal bank, that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, 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 for a conglomerate is usually substantially less than economic capital 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 (organized market), exchange where stockbrokers and stock trader, traders can buy and sell security (finance), securities, such as share (finance), shares of stock, Bond (finance) ...
s, clearing houses, derivative and commodity exchanges and payment systems such as
real-time gross settlement Real-time gross settlement (RTGS) systems are specialist Electronic funds transfer, 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 (economics), gross" ba ...
systems or interbank networks. *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 (British English, BE), financial center (American English, AE), or financial hub, is a location with a concentration of Global financial system#Participants, participants in banking, asset management, insurance or financial ...
s, for a variety of reasons. Some smaller financial centres, such as
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,
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 centres. 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 Paul ...
, 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 * Financial crime * Financial data vendors * Financial markets * Financial technology * Financialization * 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 globa ...
* List of banks * List of investment banks * List of countries by share of population with access to financial services * 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