The Financial services industry is comprised of investment firms, brokerage houses, banks, insurance companies, credit and payment processing companies, real estate companies, and other businesses. This industry has also experienced globalization, as companies such as Berkshire Hathaway (founded in 1839) are focused on offering credit cards and travel services. Some of these companies are listed below. Despite the changes in the financial industry, some of the major players continue to thrive.
Regulatory environment
The European Economic Area (EEA) has a regulatory regime that aims to protect retail customers and imposes onerous requirements on firms. The resulting regulatory environment is difficult for financial services businesses. While national regulators are generally concerned with protecting consumers, other issues are more specific to the industry. For example, EU law has strict requirements for the design and manufacture of credit cards and e-money products. In addition, consumer protection laws and expectations for advice have also been tightened.
Consolidation
In the late 1980s and early 2000s, banks began merging to form a single, larger banking sector. The changes made to the regulatory system encouraged consolidation of bank operations. Technological advances made it possible for banks to offer their services at lower cost. While the benefits of consolidation to institutions are clear, they may not be as apparent to consumers. Consumers may associate consolidation with closing down bank branches. In reality, these types of mergers often result in fewer branch closures, a lower overall interest rate, and a smoother customer transition.
Fintechs
As the fintech ecosystem grows, big banks have not taken a standard approach to partnering with startups and fintechs. Instead, they have developed in-house incubators, partnerships, white labelling strategies, and internal digital platforms to build out new services. Some big banks are already doing this, with JPMorgan Chase’s recent launch of a new digital bank in the United Kingdom and Capital One’s assertive approach to digital banking.
Investment banks
The role of investment banks is to provide financial services for big projects. They help companies raise capital for expansion and research, and they act as middlemen to channel money into specific projects. Their clients generally require more complex financing than most businesses, so they provide a variety of services. Listed companies tend to use investment banks for these purposes, and many others turn to them for their expertise and recommendations. Read on to learn more about the role of investment banks in the world of finance.
Discount brokerages
There are several major differences between discount and full service brokerages. Discount brokerages do not provide investment advice or a wide range of other services, such as tax planning and estate planning. They also charge higher fees because they are actively managed. While many retail investors opt for full service brokers, some do not need such robust services and prefer to save money on trading commissions. In these cases, discount brokerages may be an attractive alternative.
Insurance companies
A subset of financial services is insurance, and a company can provide a variety of services to protect an individual or business from the risk of loss. These services include coverage for liability, property damage, and death. In addition to insurance carriers, some companies provide agents and brokers to help customers select the right policies. Underwriters evaluate the risks and liabilities of insuring clients, and they may also serve as financial advisers to investment banks. Insurers often sell reinsurers to protect themselves from catastrophic losses.
Transaction accounts
Transaction accounts in financial services are common types of bank accounts that give customers instant access to their money. They are designed to provide the cash liquidity required to pay bills and make daily purchases. Checking accounts are an example of transaction accounts, which have high liquidity requirements and are ideal for day-to-day spending. In contrast, savings accounts do not earn interest and are generally used for storing money for long periods of time. But both transaction accounts and savings accounts have their benefits.