It can be hard to gauge the true value of the world’s financial services sector, but collated figures suggest that this entity generated a staggering £132 billion to the UK economy alone in 2019.
From a global perspective, the total value of financial services across the globe are thought to have peaked at $20.4 trillion in 2020, with this figure expected to reach $22.5 trillion by the end of this year.
However, financial services remains a broad term with many potential market niches, so it’s important to understand this before determining why the sector is so important across the globe.
What are Financial Services?
In simple and broad terms, the financial services space delivers a diverse range of fiscal services and products to people and corporations. The sector is best renowned for managing and transferring capital, driving sustained economic growth and arguably underpinning every single industry.
From a more detailed perspective, the International Monetary Fund (IMF) describes financial services as the various processes by which consumers and firms acquire fiscal goods, through the use of everything from fixed capital to loans, credit cards and financing agreements.
This huge segment of the global economy comprises a suitably large selection of firms and service providers, from banks, lenders and investment houses to insurance companies and real estate brokers.
Thanks to its cumulative value, diversity and deceptively large reach, the financial services industry is considered to be the most important economic sector. It certainly leads the way in terms of total earnings and equity market capitalisation, with large conglomerates dominating the space and handling huge sums of cash every single day.
Why are Financial Services Important?
As we’ve already touched on, financial services are key to economic growth and the success of individual industries, and it continues to be the primary driver of the global economy as a whole (but particularly in developed economies).
Most importantly, it provides the free-flow of liquidity and capital in the financial marketplace, creating economic strength and growth within a well-established and regulated framework.
Similarly, a failing or underwhelming financial services sector can drag down national economies and usher in periods of recession, while making products less accessible to individuals across the board.
This includes simple and customisable forex platforms such as the Webtrader MT4, which have broken down the various barriers to entry that once surrounded the financial market and underpinned record levels of activity through 2019.
Banks are also an integral part of the financial services space, particularly from the perspective of lending capital and helping to populate the small business marketplace.
Without this type of service, it would be incredibly hard to maintain economic growth over an extended period of time and create levels of full employment within individual nations.