Categories Of Financial Services

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The major categories of financial services include those found in financial institutions. That include: central banks, retail and commercial banks, internet banks, credit unions, savings and loans associations, investment banks, investment companies, brokerage firms, insurance companies and mortgage companies. 

These financial institutions exist to provide financial services of a wide variety of deposit, lending and investment products to individuals, businesses or both. While some financial institutions focus on providing financial services and accounts for the general public, others are more likely to serve only certain consumers with more specialised offerings. 

To know which financial institution is most appropriate in serving a specific need, it’s important to understand the difference between the types of institutions and the financial services and purposes they serve. 

Some of the categories of financial services include: 

Central Banks   

It’s responsible for the oversight and management of all other banks. In South Africa it’s the South African Reserve Bank. The bank is responsible for conducting monetary policy and supervision and regulation of financial institutions. Individual consumers don’t have direct contact with a central bank; instead, large financial institutions work directly with the Reserve Bank to provide products and services to the general public. 

Retail and Commercial Banks   

Traditionally, retail banks offered products to individual consumers while commercial banks worked directly with businesses. Currently, the majority of large banks offer deposit accounts, lending and limited financial advice to both demographics. Products offered at retail and commercial banks include cheque and savings accounts, personal and mortgage loans, credit cards and business banking accounts. 

Investment Banks and Companies   

Investment banks don’t take deposits; instead, they help individuals, businesses and governments raise capital. They pool funds from individual and institutional investors to provide them access to the broader securities market. 

Brokerage Firms   

A brokerage firm assists individuals and institutions in buying and selling securities among available investors. Customers of brokerage firms can place trades of stocks, bonds, mutual funds, exchange-traded funds (ETFs) and some alternative investments. 

Insurance Companies   

Financial institutions that help individuals transfer risk of loss are known as insurance companies. Individuals and businesses use insurance companies to protect against financial loss due to death, disability, accidents, property damage and other misfortunes. 

Mortgage Companies   

Financial institutions that originate or fund mortgage loans are mortgage companies. While most mortgage companies serve the individual consumer market, some specialise in lending options for commercial real estate only. 

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