Meaning of Financial Services

Financial services refer to economic services provided by various

financial institutions that deal with the management of money. It is
an intangible product of financial markets like loans, insurance,
stocks, credit card, etc. Financial services are products of institutions
such as banking firms, insurance companies, investment funds, credit
unions, brokerage firms, and consumer finance companies.

Characteristics of Financial Services

Customer-Specific: Financial services are customer based. These
services are designed and provided to the customers by financial
institutions as per their needs. Various elements like cost, liquidity
and maturity periods of these services are decided in accordance with
the suitability of customers.

Intangibility: These services are intangible in nature. Financial

institutions for selling their intangible product need to enhance their
brand image by improving their service quality.

Concomitant: Financial services are manufactured and delivered

simultaneously and cannot be separated. These both functions i.e.
production and supply goes at the same time.

Perishable: These services are perishable in nature and cannot be

store in advance of their need. Financial services are produced and
supplied as and when required by peoples.
Dynamic Activity: Financial services are dynamic in nature. It changes
in accordance with the varying needs of customers and the
socioeconomic environment.

Scope of Financial Services

Financial services consist of wide range of activities which are broadly

classified into 2

1. Traditional Activities.
2. Modern Activities.

1. Traditional Activities.

Financial intermediaries have been offering a large range of services

traditionally related to capital and money market activities.
These services are classified into 2 groups which are Fund based
activities and Non-fund based activities.

Fund Based Activities.

Fund based activities comprises of activities which are concerned

with acquiring funds and assets for clients. Different services
covered under fund based activities are Primary and
secondary market activities, dealing in money market instruments,
foreign exchange market activities and involving in hire purchase,
venture capital, equipment leasing etc.

Non-fund based Activities.

These services are provided by financial intermediaries on nonfund

basis and are called fees-based services. Non-fund bases activities are
specialized services offered by financial institutions to customers in
exchange for fees, commission, dividend and brokerage. This
comprises of services such as Portfolio management, stock broking,
merchant banking, credit rating etc.

Modern Activities.

Financial intermediaries beside the traditional services offers a wide

range of financial services at present. These activities are mostly in the
category of non-fund based activities.

Few of the modern activities are listed below

Merger and acquisition planning and helping with their smooth carry
out.

Providing guidance in capital reconstructing to corporate customers.

Assisting in rehabilitation and reconstruction of sick companies.

Portfolio management of large public sector corporations.