When people talk about Financial services, they often refer to investment banking and hedge fund management. But the industry encompasses much more than that. It’s a broad category that includes anything that touches money, from mortgages to insurance policies. It even encompasses things that might not seem directly connected to money at all, like PayPal and real estate.
The financial services sector has a lot of jobs, some obvious (investment banker, loan officer) and others less so (customer service for PayPal or dispute resolution for a real estate firm). And even if the job titles themselves don’t sound related to money, they might be – for example, a mortgage is a type of financial good, as is property. And everything that goes into securing those kinds of goods is considered part of the financial services industry, like inspection and appraisal.
In addition to lending and insurance, the industry also encompasses a variety of support services. These include global payment providers such as PayPal and Mastercard, exchanges for stock and commodity trading, accountants and tax filing services, credit bureaus and debt-resolution firms. It also includes reinsurers, which sell insurance to insurers to cover their risks from catastrophic losses.
These providers are crucial for an economy’s functioning. They help channel cash from savers to borrowers, and they redistribute risk among many parties. For example, banks take on the risk that borrowers won’t pay back their loans, shedding it from depositors, and reinsurers pool money from multiple policy holders to mitigate the risk of loss.