Financial Services is a term used to refer to the services provided by the finance market. Financial Services is also the term used to describe organizations that deal with the management of money. Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokers.
It is part of financial system that provides different types of finance through various credit instruments, financial products and services.
These are the types of firms comprising the market, that provide a variety of money and investment related services. These services are the largest market resource within the world, in terms of earnings.
The challenges faced by the services market are forcing market participants to keep pace with technological advances, and to become more proactive and efficient while keeping in mind to reduce costs and risks.
These services have been able to represent an increasingly significant financial driver, and a significant consumer of a wide range of business services and products. The current Fortune 500 has listed 40 commercial banking companies with revenues of almost a $ 341 trillion, up a modest 3% since last year.
Importance of Financial Services: –
It serves as the bridge that people need to take better control of their finances and make better investments. The financial services offered by a financial planner or a bank institution can help people manage their money much better. It offer clients the opportunity to understand their goals and better plan for them.
It is the presence of financial services that enables a country to improve its economic condition where there is more production in all the sectors leading to economic growth.
The benefit of economic growth is reflected on the people in the form of economic prosperity wherein the individual enjoys higher standard of living. It is here the financial services enable an individual to acquire or obtain various consumer products through hire purchase. In the process, there are a number of financial institutions which also earn profits. The presence of these financial institutions promote investment, production, saving etc.
Customer-Specific: These services are usually customer focused. The firms providing these services, study the needs of their customers in detail before deciding their financial strategy, giving due regard to costs, liquidity and consideration considerations.
Intangibility: In a highly competitive global environment brand image is very critical. Without the financial institutions providing financial products and services have good image, enjoying the confidence of their clients, they may not be successful.
Concomitant: Production of these services and supply of these services have to be concomitant. Both these functions ie production of new and innovative financial services and supply of these services are to be performed simultaneously.
Tendency to Perish: Unlike any other service, financial services do tend to perish and hence can not be stored. They have to be supplied as required by the customers. Here financial institutions have to ensure a proper synchronization of demand and supply.
People Based Services: Marketing of these services has to be people intensive and because it's subject to variation of performance or quality of service.
Market Dynamics: The market dynamics depends on a great extent, on socioeconomic changes such as disposable income, standard of living and educational changes related to the various classes of customers. Therefore financial services have to be consistently redefined and refined taking into consideration the market dynamics.
Promoting investment: The presence of these services creates more demand for products and the producer, in order to meet the demand from the consumer goes for more investment.
Promoting savings: These services such as mutual funds provide ample opportunity for different types of saving. In fact, different types of investment options are made available for the convenience of pensioners as well as agreed people so that they can be assured of a reasonable return on investment without much risks.
Minimizing the risks: The risks of both financial services as well as producers are minimized by the presence of insurance companies. Various types of risks are covered which not only offer protection from the fluctuating business conditions but also from risks caused by natural calamities.
Maximizing the Returns: The presence of these services enable businessmen to maximize their returns. This is possible due to the availability of credit at a reasonable rate. Producers can avail various types of credit facilities for acquiring assets. In certain cases, they can even go for leasing of certain assets of very high value.
Benefit to Government: The presence of these services enables the government to raise both short-term and long-term funds to meet both revenue and capital expenditure. Through the money market, government raises short term funds by the issue of Treasury Bills. These are purchased by commercial banks from out of their depositors' money.
Capital Market: One of the barometers of any economy is the presence of a vibrant capital market. If there is a hectic activity in the capital market, then it is an indication of the presence of a positive economic condition. These services ensure that all the companies are able to acquire adequate funds to boost production and to reap more profits historically.