Understanding the Financial service industry Overview will help to grow knowledge and basics of financial services sectors.
Moreover, the Financial service industry overview is simply a broad Industry which includes Bank, stock exchange, NBFCs, venture capital and more.
It primarily deals with lending and borrowing between consumers and financial institutions.
Table of Content
- Meaning of Financial Service industry overview
- what is the example of the financial services industry
- How much is the Financial Service Industry worth
- What are the main challenges of the Financial service industry
Meaning of Financial Service industry
Firstly, The word ‘Finance’ comes from the French word in the 18th Century. Later It was adopted by English speaking communities to mean “the management of money”.
Furthermore, another word which replaces finance is ‘Exchange’. Finance is also part of the way of exchange. But It is not restricted only to the exchange or/and the management of money.
At present we can not think without Finance, So finance is the soul of Economic activities. Finance is the art of managing various resources like money, investment, loan, securities, etc.
Thus, These managing systems are known as the Financial services industry.
It includes the companies which engage in investing, lending, insuring, securities trading and issuance, asset management, advising, accounting, and foreign exchange.
what are the examples of the financial service industry
The term financial system comprises of many different things, and Financial service industry overview has a lot of examples to describe.
So, here are the primary 6 types of the financial service sectors for you to consider
- Venture Capitalist
- Mutual Fund industry
- Wealth Management
Banking is the types of a financial institution which involves deposit and credit of cash transaction either in cash or online.
It is a type of Bank which accept the deposit of money and lending the money to its customers by charging an interest rate. Several types of deposits are accepted by the bank such as
- Saving deposits
- current deposit
- Fixed deposit
- Recurring deposit
Bank also provides various types of loan as
- cash credit
2. Central Bank
Every country has its own central bank, It regulates the monetary and credit system of the country. It acts as an advisor, regulator, and controller of all commercial bank activities.
It also controls all financial market and institutions of the country.
3. Co-operative Banks
It is a type of bank which holds the deposit, provide loan and other financial services to cooperatives.
In other words, Co-operatives denotes member-owned organization, groups of member and societies.
It is one of the financial service industry which sell certificate called investment share. It also accepts customer deposit then invest the funds in loan installment for consumers and small enterprises.
5. Agricultural Bank
This bank involves the lending of money to the Farmer for enhancing the crops and agricultural products.
6. Saving Bank
Saving banks has a primary purpose to accept deposit from consumer and paying the loan at specifies interest rate.
7. Foreign Bank
A foreign bank is a bank which has banking operation in both homes as well as the host country. This bank is regulated under both country’s banking regulation act
8. Investment Bank
Investment banking is a type of banking operation which helps the raising capital of individual and organization.
Lastly, the classification of Banking defines the unique role of its banking function. Each Bank has a different role and services in banking activities.
The venture capital is one of another type of financial service industry which helps startups or newbie business to provide finance. Venture capitalist basically concentrates on some unique project of new entrant business.
This financial industry has some risk factor to face the loss of credit because if startups or newbie business couldn’t make the profit for the business.
Stock Market is one of the most important capital markets in the world. Most importantly, the Country’s economic development is somehow dependent on the influence of the stock market.
In simple terms, It is the market for the traders who want to trade the share, stock, bonds and other securities. By the way, Mutual fund plays an important role in trading stock and shares.
Insurance means the protection of the loss from financial loss. On the other hand, It is one of the biggest financial service industry in the world.
Insurance Companies make these 2 broad insurance product like
|Life insurance||General insurance|
|i.||Term Insurance||i.||Health insurance|
|ii.||whole life Insuracne||ii.||Motor insurance|
|iii.||Endowment plan||iii.||Travel insurance|
|iv..||Child Plan||iv.||Fire insurance|
|v.||Pension Plans||v.||Home Insurance|
WEALTH MANAGEMENT INDUSTRY
Wealth management helps people how to manage money so that they can properly save and invest money when possible.
However, the primary purpose of wealth management is to keep ensure people that their money is utilizing in the right way.
NBFC(Non-Banking Financial Company)
Moreover, NBFC is a Non-Banking Financial Service Company which operates its company through loans and advances. NBFC is different than Bank because of the below key distinction
- Bank accepts deposit but NBFC do not
- Bank Provides Cheque and DD whereas NBFC Do not
- NBFC can’t provide ATM or Credit card but Bank does provide
- Transaction service is allowed on Bank but not in NBFC
It also carries out the transaction of stock, share, and, bond acquisition and hire-purchase insurance and chit-fund business.
How much is the Financial Service Industry worth?
Definitely, The Financial service industry is worth growing in all most all economic development country. Here, I am going to explain the brief description of “How Much is the financial service Industry worth” from the trusted source.
As per Investopedia article– The Organization for economic co-operation and Development (OECD) estimates that Financial services are 20% of total GDP in developed economies.
According to Mckinsey Global Institute in 2011, Retail Banking, life insurance, and property insurance generate approximately 6.6 trillion in annual revenue. In addition, It has tended to grow 6% compound annual rate over the preceding decade.
According to IMF and Organisation for Economic Co-operation and Development (OECD), Financial Services comprises between 12% to 19.5% of the total global economy. So It’s a vast opportunity to make a career in the finance industry.
Hence, we can now examine how this industry has scope for making career how this industry will impact in the future.
What are the main challenges of the Financial service industry
There are also a lot of difficulties and challenges where Financial services have to face in the financial Market.
After that, I will be explaining what the challenges have been faced by the financial services below the point
- Bad debt Issue
- Cybercrime Issues
- Technological issue risk
- Regulatory risk
- Increasing Competition
BAD DEBT ISSUE
It is a problem that a lot of financial services industries are facing because of the lack of collecting the debt.
Cybercrime issue is becoming a serious concern for the financial industry because of an online illegal transaction.
Nowadays every Financial industry has to rely on the Technological process to provide fast and reliable service to the customer. But Some times That technology couldn’t work at the right time at the right moment when it needs most.
So that due to some technical issue, Financial services will have to suffer a huge loss of money only for the technological error.
Regulatory Issue is one of a key point that the Financial industry face the challenges in order to obey the rules and regulations
So, key issues like
- Managing regulatory issue
- Financial reporting regulatory issue
- Data management issues
- Knowing the customer as per regulatory law
Above all is the Challenges for the financial industry to comply with norms and laws.
Competiton is somewhere good and somewhere bad for the industry. If we compete with those have more skill than you then definitely you will lose the competition.
Here the same thing happens in the financial industry that some Fintech company make challenging for the traditional banking industries. Fintech has more technological advance than the traditional bank in serving the customers.
So that some old banks are facing challenges to retain the customers as against new advanced technology applied by Fintech company.
In summary, the financial services industry makes an important role in developing a country’s economy and individual. Still, there are lots of challenges to face for The all financial Industry.