As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States. The U.S. finance industry comprised only 10% of total non-farm business profits in 1947, but it grew to 50% by 2010. Over the same period, finance industry income as a proportion of GDP rose from 2.5% to 7.5%, and the finance industry’s proportion of all corporate income rose from 10% to 20%.

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§ The history of financial services [ edit ]

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. [ 1 ]

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. in 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.

§ Banks [ edit ]

Main article: Bank

§ Commercial banking services [ edit ]

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 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 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.

§ Investment banking services [ edit ]

• Capital markets services — underwriting debt and equity. assist company deals (advisory services, underwriting, mergers and acquisitions and advisory fees), and restructure debt into structured finance products.
• 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 services. [ 2 ] Private banks often provide more personal services, such as wealth management and tax planning, than normal retail banks. [ 3 ]
• Brokerage services — facilitating the buying and selling of financial securities between a buyer and a seller. In today’s (2014) stock brokers, brokerages services are offered online to self trading investors throughout the world who have the option of trading with ‘tied’ online trading platforms offered by a banking institution or with online trading platforms sometimes offered in a group by so-called online trading portals .

§ Foreign exchange services [ edit ]

Foreign exchange services are provided by many banks and specialist foreign exchange brokers around the world. Foreign exchange services include:

• Currency exchange — where clients can purchase and sell foreign currency banknotes.
• Wire transfer — where clients can send funds to international banks abroad.
• Remittance — where clients that are migrant workers send money back to their home country.

§ Investment services [ edit ]

• Asset management — the term usually given to describe companies which run collective investment funds. Also refers to services provided by others, generally registered with the Securities and Exchange Commission as Registered Investment Advisors. Investment banking financial services focus on creating capital through client investments.
• Hedge fund management — Hedge funds often employ the services of prime brokerage divisions at major investment banks to execute their trades.
• Custody services — the safe-keeping and processing of the world’s securities trades and servicing the associated portfolios. Assets under custody in the world are approximately US$100 trillion. [ 4 ]

§ Other financial services [ edit ]

§ UK [ edit ]

Fraud within the financial industry costs the UK (regulated by the FSA ) an estimated £14bn a year and it is believed a further £25bn is laundered by British institutions. [ 6 ]

§ Market share [ edit ]

§ US [ edit ]

The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market capitalization. However it is not the largest category in terms of revenue or number of employees. It is also a slow growing and extremely fragmented industry, with the largest company (Citigroup ), only having a 3% US market share. [ 7 ] In contrast, the largest home improvement store in the US, Home Depot. has a 30% market share, and the largest coffee house Starbucks has a market share of 32% .