Financial services refers to the money related benefit or satisfaction derived from the services provided by financial service providers like Banks, Non- banking companies financial intermediaries, stock brokers, financial agents etc. In other words, 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, creditcard companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers, and some government-sponsored enterprises. Further, the classifications are –
a) Fund based financial services
- Leasing
2. Hire Purchase
3. Factoring
4. Mutual Funds
5. Bill Discounting
6. Housing finance
7. Insurance
8. Venture capital
b) Fee based financial services
- Merchant banking
2. Portfolio management
3. Credit rating
4. Stock brokering
Features of financial services
- Customer Oriented: Firstly, it focuses on customers to satisfy the requirements of customers. Thus, they fulfills the specific needs of a customer which differs from person to person.
- Intangibility: Secondly, these are intangible which makes their marketing a challenging task for financial institutions. Thus, such institutions need to focus on building their brand image by providing innovative and quality products to customers. Firms enjoying better credibility in market are easily able to sell off their products.
- Inseparable: Moreover, inseparability indicates that production and delivery takes place at the same time simultaneously.
- Manages Fund: Additionally, it specializes in managing funds of people. Thus, these services enable peoples in allocating their idle lying funds into useful means for earning revenues. Accordingly, it provide various means to people for converting their savings into investment.
- Financial Intermediation: Further, it does the work of financial intermediation as it brings together the lender and borrower. It mobilizes the funds of people who are having enough of it and transfers funds to deficient sector.
- Market Based: Further, these are market based which changes as per the changing conditions. Hence, it is a dynamic activity which varies as per the variations in socio-economic environment and varying needs of customers.
- Distributes Risk: Finally, these services transfer the risk of an individual not willing to take among different persons who all are willing to bear it.