Types of Finance Services

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Finance services are services provided by financial institutions to various sectors in an economy. Some of the companies in this finance industry include; accountancy companies, insurance companies, credit card companies, banks and credit unions. Finance services make up a vast expanse of the general services. Most of these services involve transfer, withdrawal and depositing of money. Here is a classification by Doug Foshee:

Commercial banking services
Services provided by commercial banks are aimed at helping SMEs or medium businesses raise money from other companies. Money raised this way is referred to as bonds and stock. Commercial banks conduct some services, which are; keeping money safe for their clients, issuing cheque books to clients for use in making payments, providing loans to individuals and businesses, issuing debit cards for easy and secure cashless payments, wire transfer of money between banks among others.

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Investment banking services
Investment banks are in the business of directly lending money to businesses. Their services include; capital market services which primarily involves assistance in mergers and acquisitions, private banking which are banking services provided to people who have attained a certain required minimum net worth and brokerage services that involve the buying and selling of financial securities.

Foreign exchange services
Foreign exchange services are provided worldwide between countries and banks. Wire transfer of money to international banks, currency exchange and remittance which allows individuals who are are working or living in foreign countries to send money to their mother country.

Investment services
Investment services can be broken down into three segments; hedge fund management, custody services which involve safeguarding of world securities trades and investment management which creates capital via investments by clients.

Services in insurance include underwriting insurance, brokerage insurance, reinsurance that is insurance sold to the insurers safeguarding them against losses and F&I (finance and insurance) which involves the financing and insuring of assets.
Although the finance services listed above are the main ones, there are others for instance bank cards, advisory services, venture capital, conglomerates and private equity. There are also terms in finance that are often used. They are:

  • Asset-based lending
  • Accounts receivable financing
  • Factoring
  • Purchase order financing

Asset-based lending is a form of a business loan that is secured by assets. It is also referred to as commercial financing. In asset-based lending, the loan is not repaid, but the asset is taken.
Accounts receivable financing is a type of financing where clients receive cash in the form of advanced payments that is expected to be paid by their customer. Accounts receivable financing is a form of capital for business.

Factoring is a finance undertaking where a business sells its accounts receivable at a certain discount. The one who purchases the accounts receivable is referred to as a factor hence the name factoring. The factor becomes the receiver of payments issued by the debtor.

Purchase order financing it is a financing option for businesses at times when they can’t cover the cost of doing business. Cash is issued to businesses to help fill purchase orders.
Ultimately finance services make up a big part of services in companies, countries and the world as a whole.