Financial services are used to perform a wide range of tasks. The first step is to make it simpler for individuals to conduct transactions of goods and services in the economy. Similarly there are various different types of financial services provided by banks and financial institutions for distribution of capital funds, transformation of risk and more. Let us understand the nature and types of financial services in India which is also common worldwide.
Offering financial services is a vital component of the financial system’s overall functioning. Financial services are the foundation of today’s economy, and they are essential to achieving success. A country’s long-term economic progress is dependent on the success of its financial services sector. Here we will discuss about different types of finance services provided by banks in India and worldwide. These service fund and fee based differs from financial institutions to companies.
What are Financial Services?
A financial service refers to a variety of products and services provided by the finance industry. The financial sector is made up of a varied range of organizations that are all engaged in the movement of money on a global scale, and the financial industry is no exception. Financing services are referred to as financial intermediation in certain quarters since they facilitate the transfer of funds between parties.
In general, any kind of action that includes a financial component is called as financial services, depending on the circumstances. To put it another way, financial services are the mobilization and distribution of money in their most general sense. As a consequence, it comprises all of the steps involved in the conversion of savings into capital.
Companies that fit under this category include banks, credit card companies, insurance companies, consumer financing companies, stock brokers, investment funds, and some government-sponsored organizations, amongst others. According to Financial Services International, below is the list of products and types of services provided by banks and financial institutions to customers in order to expedite the execution of various financial transactions and other connected processes.
Types of Financial Services
Financial services provided by bank are known as finance services to a broad range of businesses entities including insurance companies, credit card companies, credit unions companies, personal finance, stock brokerages, investment, accountancy, government companies and many more enterprises. Banking provides number of various different types of financial services to personal customers. Types of financial services offered by banks and financial institutions are listed below:
Current accounts are also called as business bank accounts which are one of the frequently used accounts mainly used for settlement of short-term financial needs. It enables services like handling pay-in and pay-out on day-to-day basis. For example: payout funds for salaries, paying daily / monthly electricity bills, water bills, telephone bills, daily pay-in and pay-out of business transactions, loan for business, invoice financing, Transferring funds to other accounts, payroll services, drafting day-to-day business cheques, etc.
The types of financial services examples includes debit card for using cash in most restaurants and stores, business finance, checking accounts, withdrawal of cash using ATM, etc. Apart from this bank also provide online transfers, cash transactions, business credit cards, business overdraft, to smoother your business financial needs. Now a days, bank also provide facility for opening a current account online and switch bank accounts online as well. Online banking is one of the important types of financial services provided by banks in recent days.
A savings accounts are one of the type of the bank account suitable for building society, unions or an individual used for accumulating funds for both short-term financial needs like holidays, weddings, parties, etc and long-term financial needs like saving for buying house, children retirement plans, etc. Banks offer various options on saving account types.
Saving account can be opened with the tiny amount of fund and can be used for saving regular deposits on which bank provides savings accounts with high interest on regular basis. Account holder also get facilities like: Cash transfers, online transactions, small business loans, cheques, debit cards, credit cards withdrawals and drafts to smoothly manage your daily cash needs. For all the accounts, online banking provides online savings account statements to keep frequently check on your funds.
bank overdraft means bank provide short term credit fund to smoothen out cash flow for business needs. An individual or a business can get in touch with bank representative to know the overdraft ceiling limit permitted for your account. You can borrow up to the permitted amount for which bank charges interest on the overdrawn fund.
Bank provides best high yield savings options with the intention to get appreciated in specified time frame. In other words, investment means allocating funds with intend to multiple funds over a period of time. Investment schemes provided by the bank offer comparatively better returns then the high yield savings accounts like fixed deposits and certain investment options can offer high returns with increasing level of risk, bank also provides brokerage services to buy and sell financial securities, banks also provide online trading platform for trading securities and many more services.
Banks provide asset management services to the clients who are registered with the Securities and Exchange Board as a Registered Investment Advisors and focusing on building capital for customers through their investments. Banks also provide custody services for safe keeping and dealing in world’s securities linked with customers portfolio and various other investment facilities to assist clients investment needs.
Foreign Exchange Facilities
Many large banks also provide foreign exchange broking and services to the customer around the world. These Foreign exchange services consist of currency exchange where customer can exchange different currency notes, wire transfer where customers can pay or transfer funds to the customer located outside countries, remittance services where migrant employees can transfer money to their home country. This is one of largest types of financial services provided by banks as it involves daily billions of foreign exchange transactions.
Bank facilitates insurance for their customers to cover their risk by merely paying small amount as a part of premium. Insurance covers risk for your assets, health, etc. Break up of insurance options provided by bank includes: Car Insurance which covers the cost of repair, damages or replacement for theft, Home Insurance cover loss due to damage by natural calamities, fire or burglary, etc.
The list is big and it also includes Travel Insurance includes damage of luggage, delayed or cancelled fights, loss or theft of money or passport and illness or injury during traveling, Health Insurance provide medical or hospital expenses coverage in case of sick or accident, Payment Protection insurance covers your repayments on a personal loan or mortgage loan in occurrence of accident, illness, death or redundancy.
There are different types of services provided by banks to customers like loans for purchasing assets against of security. It is also termed as secured loans where customers can repay the loan amount in monthly installments over years like: purchasing car, buying property, etc.
Banks offer pension plans as an option towards retirement investments where you can contribute small amount monthly and upon retirement you will get chunk of large money post retirement as a retirement funds. A pension schemes are long-term savings plans offered by banks. Usually retirement planners go for these schemes once they start earning good salary and banks encourage people to commence pension scheme so that they can enjoy same standard of living post retirement.
Online Banking Facilities
One of the important types of financial services provided by banks in modern days is online banking services to the customers so that they have easy access to their products and services. Online banking is very convenient medium of banking which saves lot of time and money of the customer. Mostly all banks have online banking facilities.
Customer can do number of things online like: check balances, statements, bills, savings interest calculators, transfer money, recharge phones, pay bills, view credit card summary, loan summary, overdraft settlements, buy shares, mutual funds, derivatives, checking account promotions, apply for services like fixed deposit schemes, retirement schemes, pension schemes and many more.
Other Types of Financial Services
Financial service organizations provide a wide variety of products and services to meet the demands of a diversified spectrum of clients. Let us take an overview on other different types of financial services provided by banks and financial institutions to their customers across worldwide.
Under Market Activities
- Share transfer agencies,
- Money market operations,
- Stock market operations,
- Futures, options, and derivatives,
- Retail market operations,
- Asset management, and more.
Under Risk Finance Products and Services
- Export credit guarantee,
- Other Insurance related products.
Under Consulting Services
- Investment valuation services,
- Project rehabilitation services,
- Business consulting services,
- Project preparation services,
- Project evaluation services,
- Options including re-engineering, mergers and acquisitions,
- credit rating services, and more.
Under Provision of Financial Resources
- Managing Investible Money,
- Mutual and pension funds,
- Portfolio management,
- Merchant banking and other financial services.
Under Research and Development
- Investor education,
- Employee training, and more.
Under Provision of Financial Services Funds
- Banking services,
- Asset finance,
- Factoring and forfeiting,
- Venture capital and more.
It is the primary task of financial institutions to take advantage of the resources that are available, distribution of finance investment, lowering risk via aggregation and more. Hope this information on different types of financial services will be much useful to you.
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Basics of Banking and Financial Services for Beginners
- Chapter 1: What is Bank and Role of Bank in Economic Development
- Currently Reading: Different Types of Financial Services Provided by Banks
- Chapter 3: Different Types of Banking and Financial Institutions
- Chapter 4: What is Retail Banking and Services provided by the Banks
- Chapter 5: What is Commercial Bank and Services offered by Banks
- Chapter 6: What is Private Banking and Services offered by Best Banks
- Chapter 7: What is Investment Banking and Services offered by Bankers
- Chapter 8: What is Investment? How to Start Systematic Investment Plan?
- Chapter 9: What is Fixed Income Securities Market?
- Chapter 10: What are Bond Funds? Difference between Stocks and Bonds
- Chapter 11: What is Stock Market? How to Invest in Stock Market?
- Chapter 12: What is a Mutual Funds? Types of Mutual Funds with Examples
- Chapter 13: What is Futures Trading? How to Trade in Future Contracts?
- Chapter 14: What is Options Trading? How does Options Trading Works?
- Chapter 15: Banking Quiz - Basics of Banking and Financial Services for Beginners
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