After the global crisis, people called for stronger supervision of financial services. But what are financial services? Among the things that money can buy, there is a difference between goods (tangible things that can last a long or a short time) and services (tasks that someone does for you). Financial services are not financial assets themselves, such as mortgages or car insurance policies to buy a home, but can be defined as the process of obtaining financial assets. In other words, this is a transaction necessary to obtain financial assets. The financial sector includes a variety of transactions in real estate, consumer finance, banking, and insurance. It also covers various investment financing models, including securities (see box).

However, the distinction between financial sectors is not yet clear. For example, people in the real estate industry (such as mortgage brokers) can provide services by helping clients find loans with a maturity structure and interest rates that suit their circumstances. But these customers can also obtain credit through their cards or commercial banks. The bank collects deposits from clients and lends them to generate higher returns than it pays for these deposits. Investment banks help companies raise funds. Insurance companies obtain premiums from clients who purchase insurance policies to avoid the risk of insured events such as car accidents or fires.

Intermediation


Fundamentally, the financial sector is an intermediary agency. It transfers funds from depositors to borrowers and connects people who want to reduce risk with people who are willing to take it. For example, people saving for retirement can benefit from brokerage. The higher the retiree income, the less savings are needed to reach the retirement income goal, taking inflation into account. To obtain this profitability, money must be lent to the people who will use it (interest). Borrowing and getting paid are complex and risky activities. Depositors generally do not have the experience or time to invest in these activities. It is better to look for an intermediary.

Some depositors deposit their savings in commercial banks, which obtain deposits from various sources and pay interest to depositors. Banks pay this interest by obtaining money from loans granted to individuals or companies. You can make loans to people who want to buy a home, businesses that want to invest or need cash to pay wages, or you can make loans to the government. Banks provide various services within the framework of daily activities. For depositors, the service is what the bank should pay attention to when calculating the appropriate interest rate charged on loans and ensuring that deposits can be withdrawn at any time; For mortgage borrowers, it is the ability to buy a home and pay over time. This also applies to companies and governments, which may turn to banks for various financial needs. The payment a bank receives for these services is the difference between the interest rate on the loan it charges and the amount that must be paid to the depositor.

Another type of intermediary is insurance. People can save money to pay for unforeseen expenses, such as when saving for retirement, but retirement is more likely than illness or car accidents. If someone wants to take these risks, it is generally better to buy an insurance policy that pays within the coverage. Insurance intermediaries pool the payments (called premiums) from policy buyers and take the risk of paying sickness premiums plus money that can be made through investments for sick people or in an accident. Therefore, financial service providers help to flow cash from depositors to investors. Borrowers and redistribute risks. 

They can be Investors increase savers' money, control investments and share risks. In many cases the intermediary includes risk and money, because banks run the risk that the borrower will not repay the money, exempting depositors from facing this risk. With Many borrowers, if a bank is not paralyzed OR two borrowers do not pay. The insurance company can Pooled funds and then used to pay the holders If the risk becomes reality, the corresponding policy will be adopted. People can care Provide many financial services on their own, but possibly more Profitable payment method.