The financial services industry, also known as the finance sector, encompasses all roles that manage and exchange money. These include credit unions, banks, credit-card companies, insurance firms and investment companies. It is a vital economic sector, as it supports the growth of other industries by providing capital to investors who wish to invest in them, and helps people manage risk and save for future needs by providing access to credit.
Financial services provide depository services, such as deposit products (checking accounts and savings accounts) that allow customers to store their money safely and earn interest. They also provide lending services, which help individuals and businesses obtain funds by granting them loans or credit lines to cover their expenditures. These institutions also evaluate the creditworthiness of borrowers and determine interest rates, which vary by product.
They also offer a variety of other products and services, such as investment management, which involves managing assets such as pensions, insurance policies, hedge funds and mutual funds. They also underwrite debt and equity offerings for private and public companies, as well as assist in mergers and acquisitions by arranging the necessary financing.
Finally, they administer payment systems by transferring funds between payers and recipients, such as through wire transfers, credit and debit cards, bank drafts (such as checks) and automated clearing house transactions. They also trade securities, commodities and foreign currency and operate financial markets, such as stock and derivatives exchanges. They may also offer reinsurance to insurers to protect them from catastrophic losses.