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            The term financial services is not short of definitions, it can be defined in the simplest way as to include a plethora of continuously increasing services offered by financial institutions such as Banks, credit card companies, insurance companies, mutual fund providers, etc. As the world becomes more complex, so are the financial institutions. In order to meet the growing demands and compete in the ever-growing financial market, the financial institutions are constantly innovating and developing new products thus increasing the financial services exponentially. To put it in other words, the financial services of today will not be the same as that of tomorrow.

             Before entering into the arena of comprehending the features and types of financial services, let us take a brief look at the history of the term financial services. The United States of America, owing to its superpower status is the leader in defining global trends across arenas. The formalization of the world financial services can be traced to the passing of Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999 in the US. As the law relaxed on the policy of preventing financial institution to provide more than one financial service, this led to wide-scale collisions of various institutions and thus consolidating financial institutions with integrated services, thus popular usage of the term financial services in the market.

Essential components of financial services

  • Financial services are zealously focused on enhancing the experiences of the customer.

  • They are intangible.

  • They have a transitory nature, meaning to say that a service’s function comes to an end after it fulfills its purpose.

  • They are the connecting blocks or the intermediaries between the two parties in exchange, be it any exchange.

  • They are innovative and solution seeking in nature

  • They are dynamic and spontaneous. Each financial service has its own distinct nature in accordance with the time and socio-economic context of the place.

Types of financial services

                There are a number of ways of classifying financial services. One way of classifying is to divide it into traditional activities and modern activities. The more popular classification encompassing all the services is that on the nature of the service. They are:

  • Capital market service: refers to services pertaining to the capital market engaged in the exchange of bonds, securities, etc. It includes the services rendered by mostly the lending institution providing long-term funds.
  • Money market services: refers to services involving the exchange of financial instruments with high liquidity and short maturities. The institutions providing such services include commercial banks, central banks, acceptance houses, discount houses, bill brokers and non-banking financial institutions.
  • Retail services: involves services which are up for direct consumption by the customers.
  • Wholesale services: refer to the services offered to the corporate institution who may convert it into retail services.
  • Fund based services:  constitute the bulk of the financial services. It refers to services involving lending, investments, reliefs, etc. where the institution providing the services takes a portion of equity.
  • Fee-based services: as the name suggests, the services rendered by the institutions are charged with a standardized price.

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