Financial services

Financial services are important activities related to money that are provided by special types of companies and organizations. These services help people and businesses manage their money, save for the future, and make important financial decisions. They are part of the service sector and include many different kinds of work focused on handling money and financial planning.

The finance industry mainly includes commercial banks that help big companies and countries by providing liquidity, managing risks, and handling trades. This industry's size and influence have caused debates, especially seen in movements like Occupy Wall Street in 2011.

There are many types of financial institutions, such as credit unions, banks, savings and loan associations, trust companies, brokerage firms, and payment processors. These institutions offer services like accountancy, investment banking, and personal asset management. They also provide products like insurance, credit cards, mortgage loans, and pension funds.

History

See also: Global financial system § History of international financial architecture

The phrase "financial services" started being used more often in the United States after the Gramm–Leach–Bliley Act in the late 1990s. This law allowed different kinds of financial companies to merge.

Companies have two main ways to handle this new style of business. One way is for a bank to buy an insurance company or an investment bank, keep the old names of these companies, and add them to its own big group of companies, called a holding company. This helps the bank earn more money in different ways. Outside the U.S., like in Japan, other types of companies can also be part of this group. Each company still looks separate and serves its own customers.

The other way is for a bank to create its own insurance or brokerage parts and try to sell these services to its current customers. The bank may offer rewards to customers who use many of its services together.

Relationship to the government

The financial sector often gets help from the government during big economic problems. However, these types of help are not as popular with people as support for other industries.

Banks

Main article: Bank

Commercial banking services

Main article: Commercial bank

A commercial bank is often just called a bank. It is different from an investment bank, which helps businesses get money from other companies instead of lending money directly.

Commercial banks do many important things:

• Keep money safe and let people take it out when they need to.
• Give out chequebooks so people can pay bills.
• Offer loans for people, businesses, and buying homes.
• Provide credit cards and debit cards for paying.
• Let people do banking at a branch or using ATMs.
• Help move money between banks and people.
• Make it easy to pay bills automatically.
• Let people see and manage their money online.
• Offer special checks guaranteed by the bank.
• Help with important documents.
• Accept money from people and lend it out.
• Sell investment options like mutual funds.

The United States has the most commercial banking services.

Investment banking services

Main article: Investment banking

Investment banks help companies and governments get money and give advice on big business deals. They also help manage money for very wealthy people and offer many other financial services.

New York City and London are the biggest places for investment banking. New York focuses more on business within the U.S., while London handles a lot of business around the world.

Foreign exchange services

Foreign exchange services are offered by many banks and special foreign exchange brokers. These services help people trade different kinds of money, send money to other countries, and support workers who send money home.

London was very important for trading money around the world in 2009, handling a big part of all the money traded every day. More US dollars were traded there than in New York, and more Euros than in all of Europe together.

Investment services

Investment services help people manage and grow their money. A collective investment fund lets many people pool their money together to invest in different securities, aiming for a shared goal. Investment advisory offices are run by experts who give advice on financial planning and help invest money for their clients.

Other types of investment services include hedge fund management, which uses special banking services to carry out trades, and private equity, where funds buy controlling shares in private businesses. Venture capital supports new, fast-growing companies, often started with help from an angel investor. A family office manages wealth for rich families, similar to private banking. There are also advisory services where experts act as both brokers and consultants. Custody services safely handle securities trades and manage investment portfolios around the world.

New York City is the biggest center for these services, with London following closely.

Insurance

Main article: Insurance

Insurance brokers help find insurance for their customers, usually for big things like buildings or businesses. Websites have started offering basic price comparisons for insurance, which has caused some debate in the industry.

Insurance underwriters help individuals get insurance through agents, brokers, or stock brokers. They can also help businesses with similar types of insurance. This includes types like life insurance, health insurance, and property insurance.

Reinsurance is a special type of insurance that insurers buy to protect themselves from very big losses. The biggest insurance markets in the world are in the United States, Japan, and the United Kingdom.

Other financial services

Financial services include many helpful activities. Angel investment networks are groups of people who provide money to start new companies. Credit card networks connect stores with banks that issue credit cards, with major networks including UnionPay, Mastercard, Visa Inc., Rupay, American Express, and Discover Financial.

Other services include market makers, who help buy and sell assets easily. Large financial companies called conglomerates work in many areas, like insurance and banking, which helps them use money more wisely. Debt resolution helps people manage too much debt without going bankrupt. Financial market utilities are important systems like stock exchanges and payment networks that keep money moving smoothly. Payment recovery helps businesses get back money they paid by mistake.

Financial exports

A financial export is a service that a company's own country provides to another country. Usually, services like banking and insurance are done within a country, but more and more, these services are done in other countries. Some small places, like Bermuda, Luxembourg, and the Cayman Islands, are not big enough to handle all their own financial work, so they help other countries instead.

The United Kingdom is the biggest provider of these services. In 2014, it provided about $95 billion worth of financial help to other countries. The UK is good at this because of special groups like Lloyd's of London for insurance and the Baltic Exchange for shipping. Many big companies and banks have offices in places like London and Edinburgh.