Financial services are a vital part of the economy. They help businesses raise and disburse money to fund their activities. They also help them manage and protect their investments. They are also essential in ensuring that the economy as a whole grows at a balanced pace. Financial services include banking, investment, insurance, and debt management.
While some people may see this industry as purely about money, there are many other aspects of the industry to consider. For example, an insurance policy that helps you recover from a disaster is both a financial good and a financial service. Likewise, the brokers who search for rates and underwriters who create policies are both part of this industry.
Other financial services include credit unions and credit card companies, payment networks and global transaction systems like Visa and Mastercard, debt resolution services, factoring and forfaiting companies, and financial market utilities (stock, commodity and derivative exchanges).
Investing in startups and small businesses is another important aspect of this sector. Typically, independent wealthy individuals known as angel investors provide this investment capital in return for ownership stakes or profit participation. This type of financing is crucial for many startups, but it can be risky because it involves giving up some control.
Financial services also provide support for the economy by promoting domestic and foreign trade. The emergence of these companies promotes the sale and export of goods in a country, thus leading to more production and employment opportunities. This boosts economic dynamism and allows backward regions to catch up with the rest of the economy.