Basics of Financial Service Industry

The financial services industry plays an important role in the world’s economy. The industry as a whole is vast, encompasses many types of businesses, and includes companies engaged in activities such as investing, lending, securities trading, asset management, accounting, and advising. The financial services industry offers a wide range of career opportunities because of its diverse landscape.

What is the Financial Service Industry?

The financial services industry provides financial services to the people and also the companies. This sector is made up of different financial organizations such as banks, investment companies, finance companies, money lenders, and insurance companies. The financial service industry is the most important part of the Indian economy and leads the world in terms of earnings.

Features of the Financial Service Industry

  • It maintains the public’s confidence
  • It helps in the development of the financial sector
  • It facilitates and supervises the legislation and regulations
  • The benefits services are intangible
  • It promotes the best practices and exchange of information by maintaining contact with foreign regulators.

Role of the Financial Services Industry

Before starting any kind of business a person needs money. A person invests money on ideas that will be used in the production process to generate income. Searching for a person to invest in the idea or company is time-consuming at the same time it’s a difficult process also. Investors won’t take a risk to invest their money without knowing much about the idea. So it becomes difficult for the investors to choose the company or idea to invest.

To overcome this problem, the government came up with the financial service industry. This sector acts as a mediator or a link between money lenders and the borrowers.

  1. The financial service industry exists to provide a free flow of information between money lenders and borrowers.
  2. The financial intermediaries came into the picture to smoothen the system between lenders and borrowers.

Financial intermediaries include financial institutions. Banks and insurance companies are called two main and most benefiting financial institutions. The other financial institutions are mutual funds, savings banks, credit unions, brokers, pension funds, and stock exchanges.

  1. The investment industry is the main part of the financial services industry. And which includes savers of money and users of money. Savers of money want to invest their money to gain interest from it and the users of money will use the money for production or operation purposes and make a profit from it.
  2. The goal of the economic system is to allocate scarce resources efficiently thus the financial service sector helps in allocating the capital and resources most productively.
  3. The financial service industry also provides better information about investment opportunities.

Benefits of Financial Service Industry:

  1. This sector provides a wide range of services and products that meet the needs of investors and their benefit.
  2. It provides liquidity, low-cost transactions, accurate information, and the ability to manage the risk.
  3. It provides a smooth system and free flow of communication between borrowers and lenders.
  4. Protects the investor’s interest.
  5. It maintains transparency in every transaction that deals with it.

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