A healthy financial services sector is essential to our lives. It helps us get the money we need for mortgages, education, vehicles and more. It enables individuals to save for retirement, emergencies and other goals and protects us from risk through insurance. And it serves small businesses, large companies and even nonprofits.
The financial services industry is vast, including banks, brokers and mortgage lenders. It also includes credit unions, stock exchanges and clearing houses, debt and equity markets, and payment systems like real-time gross settlement systems. It’s easy to think of these services as separate entities, but they all play a part in helping us manage our money.
In fact, the lines that separate these sectors are blurring as the industry becomes increasingly consolidated. As a result of deregulation, it’s now common for companies to offer products across multiple categories—e.g., a bank may now offer investment, commercial banking and insurance services. And many firms are merging to become financial conglomerates, which can help them grow and offer more to their customers.
The financial services sector is a critical component of the national and global economy, and it affects everyone. The stronger it is, the healthier the economy is—and the more purchasing power consumers have. But when it fails, the impact can be devastating. A financial crisis can slow a country’s economy, leading to unemployment and other problems, like the 2008 recession. It can also cause investors to lose confidence in the market, which can lead to lower spending and less economic growth.