Financial services is a term used to refer to the services provided by the financial market. Financial services is also the term used to describe organizations that deal with the management of money. Examples are banks, investment banks, insurance companies, credit card companies, and brokerage houses.
It is part of the financial system that provides different types of financing through various credit instruments, financial products and services.
These are the types of businesses that make up the market, which provide a variety of money and investment related services. These services are the world’s largest market resource in terms of revenue.
The challenges facing the market for these Services are forcing market players to keep pace with technological advancements and become more proactive and efficient while keeping costs and risk reduction in mind.
These services have been able to represent an increasingly important financial engine and a significant consumer of a wide range of services and commercial products. The current Fortune 500 has listed 40 commercial banking companies with revenues of nearly $ 341 trillion, up a modest 3% from last year.
Importance of financial services: –
It serves as a bridge that people need to gain more control over their finances and make better investments. Financial services offered by a financial planner or a banking institution can help people manage their money better. It gives clients the ability to understand their goals and plan for them better.
It is the presence of financial services that allows a country to improve its economic situation whereby there is more production in all sectors leading to economic growth.
The benefit of economic growth is reflected on people in the form of economic prosperity in which the individual enjoys a higher standard of living. It is here that financial services allow an individual to acquire or obtain various consumer products through hire purchase. In the process, there are a number of financial institutions that are also making profit. The presence of these financial institutions promotes investment, production, savings, etc.
Customer specific: These services are generally client focused. Companies that provide these services study their clients’ needs in detail before deciding on their financial strategy, taking into account considerations of cost, liquidity and maturity.
Intangibility : In a highly competitive global environment, branding is crucial. Unless financial institutions providing financial products and services have a good image and enjoy the trust of their customers, they may not be successful.
Concomitant: The production of these services and the provision of these services must be concurrent. These two functions, namely the production of new and innovative financial services and the provision of these services, must be carried out simultaneously.
Tendency to perish: Unlike any other service, financial services tend to perish and therefore cannot be stored. They should be provided according to the needs of the customers. Therefore, financial institutions must ensure good synchronization of demand and supply.
People-Centered Services: The marketing of these services must be people intensive and, therefore, it is subject to variability in performance or quality of service.
Market dynamics: Market dynamics depend to a large extent on socio-economic changes such as disposable income, standard of living and educational changes related to different categories of customers. Therefore, financial services must be constantly redefined and refined taking into account the dynamics of the market.
Promote investment: The presence of these services creates more demand for products and the producer, in order to meet consumer demand, invests more.
Promote savings: These services such as mutual funds offer many possibilities for different types of savings. In fact, different types of investment options are made available for the convenience of retirees as well as the elderly so that they can be assured of a reasonable return on their investment without too much risk.
Minimize the risks: The risks of both financial services and producers are minimized by the presence of insurance companies. Different types of risks are covered which not only provide protection against fluctuating business conditions but also against risks caused by natural disasters.
Maximize returns: The presence of these services allows businessmen to maximize their returns. This is possible thanks to the availability of credit at a reasonable rate. Producers can avail of various types of credit facilities to acquire assets. In some cases, they may even opt to lease some very high value assets.
Advantage for the government: The presence of these services allows the government to raise short and long term funds to meet both revenue and capital expenditure. Through the money market, the government raises short-term funds by issuing treasury bills. These are purchased by commercial banks with money from their depositors.
Capital market: One of the barometers of any economy is the presence of a vibrant capital market. If there is hectic activity in the capital market, then this is an indication of the presence of positive economic conditions. These services ensure that all businesses are able to acquire sufficient funds to increase production and reap more profits over time.