The Financial services sector encompasses a wide range of service sector firms that provide financial management. It includes credit unions, banks, insurance companies and many government-sponsored enterprises.
The presence of the service sector in any country not only boosts the economic growth but also helps in promoting domestic and foreign trade. Various types of financial services like mutual funds, factoring, credit cards and hire purchase finance make it easier for the consumer to buy essential as well as luxurious items.
Insurance is another important sub-sector of the financial services industry, which includes life, auto, health and other kinds of insurance policies. It also includes brokers who search for insurance rates and underwriters who create these policies.
Investment services are another major sub-sector of the financial services sector. These companies manage investments for individuals and businesses.
Banking services are another major sub-sector, which includes large commercial banks and community banks as well as some smaller institutions. Banks earn their revenue through the spread of interest rates between loans and deposits.
The financial services sector is in a period of consolidation, with more and more banks merging to create larger conglomerates and economies of scale. The Glass-Steagall Act was repealed in the late 90s, creating opportunities for small and large banks alike.