The financial services industry encompasses the market of companies that provide a variety of economic services to businesses, consumers and governments. These services include lending, deposit-taking, insurance, credit-card processing, investment banking and global payment systems. Often, these businesses are regulated by government agencies to ensure transparency and fairness.

The economy of a country depends on the health of its finance sector. Without it, individuals with funds to save might have trouble finding those who need their money and people who need to spend might be forced to save excessively, slowing economic growth. Financial services also facilitate trade and investment, and they are a vital part of every country’s economy.

Financial services are intermediation and redistribution of risk. They help channel cash from savers to borrowers, who might not otherwise be able to find each other, and they provide credit and insurance against loss. In addition, they manage assets on behalf of investors who pay them for their expertise. This includes the management of portfolios of stocks, bonds and other securities. It also includes the provision of debt and equity capital to businesses for expansion, as well as the underwriting of mergers and takeovers.

In addition to providing a vital service to the economy, financial services are also an important employer. The industry employs more than a quarter of the world’s workforce and is one of the fastest-growing sectors of the economy. It is also a source of many high-paying jobs, with professionals in the industry earning an average salary of $110,000 per year.

Despite the importance of the industry, it can be difficult to predict the future of financial services. The rapid evolution of new products and technological innovations can challenge regulators and supervisors to keep pace. And in some cases, bad actors may find ways around regulations and supervision to pursue their own interests.

The industry can be complex and require specialized knowledge. For example, a stockbroker must understand the dynamics of a company and its industry, as well as the financial markets, to make informed trading decisions. A financial manager must be able to assess the risks and rewards of various investment opportunities, and a credit analyst must be familiar with the history of a borrower’s creditworthiness in order to evaluate the loan risk for a bank.

Moreover, the industry is characterized by the prevalence of large, multinational companies that offer a diverse range of services worldwide. These corporations usually operate under a holding company model, in which they acquire other financial services firms and keep them within their own corporate structure. In this way, they can maintain their own brands and customer bases while diversifying their earnings streams. Alternatively, they can combine the other financial services with their own and sell them as a single package. In the United States, this type of merger is called a financial conglomerate. In Europe, the term for this is a vertical integration. In either case, these large companies can generate significant economies of scale and compete effectively in the global marketplace.