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Financial services can be defined as the economic services provided by the finance industry. These services related to finance are provided by the business that manages money, including credit unions, banks, credit cards companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises.
In simple terms can be described as follows: “Financial Services is a term used to refer to the services provided by the finance market”. Financial Services is also the term used to describe organizations that deal with the management of money. Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokerages.
Ingenuity means the ability to solve difficult problems; the power of creative imagination. In the context of financial services, ingenuity means enhancing our clients’ lives through innovation.
The concept of “financial innovation” is defined as:
Financial services provided by financial institutions is part of the financial system, these institutions provide different types of finance through:
In financial instruments, it includes cheques, bills, promissory notes, debt instruments, letter of credit, etc.
In financial products, it includes different types of mutual funds, extending various types of investment opportunities. In addition, there are also products such as credit cards, debit cards, etc.
Services include leasing, factoring, hire purchase finance etc., through which various types of assets can be acquired either for ownership or on the lease. There are many types of leases and factoring services available.
Thus, financial services enable the user of these type of services to obtain any asset on credit, according to his convenience and at a reasonable interest rate.
The concept of financial innovation can be defined in simple terms as:
The role of social networks in promoting financial services is a particularly interesting evolution. Many social networking sites like Twitter, Myspace, Facebook, and YouTube are all being used to offer new financial services, increase the interaction with the customer and collect new ideas from outside the financial institution. These media allow in the collection of feedback and ideas. This feedback and ideas can be used to start a company’s innovation processes. This massive outreach of these social media can pose a challenge to handle. Clearly, there are also security and privacy challenges associated with them. This means that often there will be a need to create new organizational structures to effectively coordinate the various inflows of information and the tracking of the “external idea” towards absorption or rejection.
Following are the some of the reasons due to which it is necessary to make innovations in financial services:
The innovation made in the world in payment systems and the introduction of mobile-money transfer systems through operators have created new risk factors for banks. Reverse innovation i.e. innovation in less economically advanced regions creates pressure for better and cheaper financial services in more advanced regions. But this pressure also creates a more efficient global economy for companies that need geographical expansion. The cost of innovation in this less economically advanced region is extremely low. In the global apps market, non-bank payment options are also on the increase as carriers opt for third-party payment services like Paytm, which almost has accumulated a platform of 200 million online identities with a staff base of just 70 people. The main aim of these new services is that customer identity is a key component in the modern economy. Banks are accumulating captive funds just to access the Fintech start-up ecosystem and to support the start-up boot camps.
Fintech funding has grown three times faster than venture capital funding overall. Start-up activity has to be used to push competitive advantage and shape structural change in a bank’s favour.
Following are the importance of financial services:
Apart from accepting deposit and lending money now, financial institutions are providing following innovative services:
The future of financial institutions providing financial services lies in the Internet and globalism. The future belongs to companies that can create globally efficient platforms that serve customers well, involve third parties through partnership or ecosystems and involve customers too. Financial institutions need to respond more quickly to their customer needs probably outside their existing areas of geographical expertise.