7 Types of Financial Services: What Are They? And How Do They Work?

Financial services is a pretty broad term that is used to describe companies offering services based on operations with money. These can be loans and other forms of loans, accounting, deposits, investments, and so on. For example, both banks and stock exchange corporations are financial services, and so are insurance companies.

Nowadays, most of such businesses look a bit different from what they traditionally used to be. Thanks to technological progress and global digitalization, many of those services can be reached through the internet. Many banks have their own mobile applications for easy mobile banking, and stock manipulations can be done from smartphones too.

Of course, because of the nature of financial services, not all of them can be safely implemented into mobile applications. But still, digitalization offers a whole new field of opportunities and can be used to bring a huge number of new clients. That’s why financial software development services exist and are so popular today. They can create any program you need to your liking and requirements, no matter the difficulty.

These financial software development services are experts in creating software, even if it involves a lot of complex operations and features. In general, hiring such companies is the best option if one needs an app to be developed. It’s certainly the most cost-effective solution that is guaranteed to provide you with the product of demanded quality.

However, while the benefits of mobile applications are pretty obvious, the nature of financial services themselves is a pretty complex subject. There are many different types of them, and all are based on different concepts. So, read along to learn about the types of such businesses.

Fund Management

Fund management companies are the ones that are experts in investments and know-how to bring profits to both their clients and themselves. The main principle is very simple: you give them money, they invest it, they gain profits, you get your money and most of the profits, and they take part of the profits too.

This doesn’t mean you are obliged to give them money, though. Your initial funds can be represented by stocks, property, gold/silver, and bonds too. Different businesses in this sphere have different regulations regarding the funds, so it’s better to contact the one you’re interested in directly and learn whether they will take your investment.

Banks

We all know what banks are. These are the institutions where you can take credit, put a deposit, or simply store money. Today, there are 3 main types of banks: 

● Commercial and retail banks - the most well-known and traditional form of banking. The first ones work with enterprises, and the latter handles operations with individual clients.

● Central banks - all banks are regulated by the governments of the countries where they are located. Yet, central banks are the ones responsible for the control and monitoring of all the other ones. They are kind of supreme supervisors of the banking world

● Online banks - the newly born form of these financial services. The main concepts stay the same, it’s just that they handle all the processes online through mobile applications and websites. Some are affiliated with already existing big banking corporations, while others are independent.

The main income of banks comes from credits. But where does the money for such loans come from? From other customers that put deposits into banks. They offer their money, the bank uses it however they will, including giving loans, and the client gains interest. The credit works the opposite way - you take a loan and are free to use the money, but you are obliged to pay the annual fee for using these funds.

Insurance Companies

Insurance companies have always been popular, as they bring their customers the feeling of security in “what if?” situations. At the start, the client makes the first payment and then must pay every month or so. What do they get in exchange?

The main concept looks like that: if something happens to the property that was insured (be it a car, a house, or your health), the company pays you a huge compensation. Of course, you must prove to them that the situation wasn’t created on purpose to receive that compensation.

Accounting

Accountants are people who have very deep knowledge about all kinds of financial operations. Most corporations turn to account businesses or hire individual specialists to keep track of all the processes inside the company. The main goal of their work is to supervise the flow of money, including all the tiniest details, and ensure that the business is profitable.

Also, accounting enterprises don’t always offer their services commercially. Some of them work to help individual customers with their operations, such as investments or taxes. The ones that work with taxes are called tax consultancy services and sometimes are placed into a separate category. And of course, accountants gain a percentage from such operations or simply have fixed wages.

Advisory

Financial advisors are exactly what you expect them to be. Doesn’t matter if you have a huge business and need to make a tough decision, or inherited a lot of money and want to put it to use somehow. Such specialists give professional advice of all kinds. 

The main goal is to provide customers with a good understanding of the subject, maximize their profits and minimize the losses. And it’s in the advisor’s best interest to give real working devices, as their reputation depends on it. Sometimes they can gain interest from the ideas they suggested too.

Brokerage

Brokerage usually depends on exchanging stocks and manipulating other forms of funds to gain profit. For example, they can play on the stock market, by buying stocks for cheap and then selling them for a higher price. Or they can benefit from the currency exchange when the price for a particular currency goes higher or lower. 

Brokers usually don’t operate their own funds, but take money from the clients and gain profits from such manipulations. They have many similarities with fund management companies, with the main difference being the focus of brokers on the types of exchanges mentioned before. 

Audits

Auditing means examining all the financial and other types of operations inside a corporation to ensure that everything is true and legal. The main goal of audits is to prevent fraudulent processes and ensure that no laws are broken. In short words, auditing businesses check the legality and safety of the flow of money. Usually, audits are held once a year or 6 months, and the service gets paid for every single one.

Final Words

These are the most well-known and generally distinguished types of financial services. Of course, there are many more of them, each with certain nuances, tiny differences, and profitable concepts. After all, the main goal of all businesses is to earn money, if it means helping other companies with their fund management or safety of operations.

So, the best idea is to turn to professionals in any situation you need, even if it requires making a decision. Because as we learned, professional advisories exist too and will lead you the right way. And don’t forget about the benefits of hiring a financial software development company too. We’re living in a world where everything is digital, so use it to your advantage. Good luck!

Business Finance