Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises. Financial services companies are present in all economically developed geographic locations and tend to cluster in local, national, regional and international financial centers such as London, New York City, and Tokyo.
The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.
Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g. Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.
Commercial banking services
A commercial bank is what is commonly referred to as simply a bank. The term "commercial" is used to distinguish it from an investment bank, a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).
The primary operations of commercial banks include:
- Keeping money safe while also allowing withdrawals when needed
- Issuance of chequebooks so that bills can be paid and other kinds of payments can be delivered by the post
- Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home, property or business)
- Issuance of credit cards and processing of credit card transactions and billing
- Issuance of debit cards for use as a substitute for cheques
- Allow financial transactions at branches or by using automatic teller machines (ATMs)
- Provide wire transfers of funds and electronic fund transfers between banks
- Facilitation of standing orders and direct debits, so payments for bills can be made automatically
- Provide overdraft agreements for the temporary advancement of the bank's own money to meet monthly spending commitments of a customer in their current account.
- Provide internet banking system to facilitate the customers to view and operate their respective accounts through internet.
- Provide charge card advances of the bank's own money for customers wishing to settle credit advances monthly.
- Provide a check guaranteed by the bank itself and prepaid by the customer, such as a cashier's check or certified check.
- Notary service for financial and other documents
- Accepting the deposits from customer and provide the credit facilities to them.
- Sell investment products like mutual funds Etc.
The United States is the largest location for commercial banking services.
Investment banking services
- Capital markets services - underwriting debt and equity, assist company deals (advisory services, underwriting, mergers and acquisitions and advisory fees), and restructure debt into structured financeproducts.
- Brokerage services - facilitating the buying and selling of financial securities between a buyer and a seller. Stock brokers generally require commissions or other charges for brokerage services.
- Private banking - Private banks provide banking services exclusively to high-net-worth individuals. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking service. Private banks often provide more personal services, such as wealth management and tax planning, than normal retail banks.
New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in London international business and commerce make up a significant portion of investment banking activity.