Introduction to Financial Services


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This presentation starts with a short introduction to money and how financial services are a means of facilitating its various functions. Financial Services and Financial Products are discussed in detail with special emphasis on their types, characteristics, marketing and the financial services industry. The presentation ends with an exercise requiring you to visit a web resource and answer the questions that follow.

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Introduction to Financial Services

  1. 1. Financial Services Marketing (303)
  2. 2.  SBI Capital Markets Limited Bajaj Capital Limited DSP Merrill Lynch Limited Birla Global Finance Limited Housing Development Finance Corporation PNB Housing Finance Limited ICICI Group LIC Finance Limited L & T Finance Limited Karvy Group Mrs. Charu Rastogi, Asst. Proff.
  3. 3.  Money is the root of all progress For thousands of years, metals such as gold, silver and bronze served as money because they were available, affordable, durable, fungible (substitutable), portable and reliable But shortages of precious metals created problems for the economy leading to development of paper money and electronic money Money is essentially a matter of belief, faith and trust Money is a matter of functions four; a medium, a measure, a standard, a store Mrs. Charu Rastogi, Asst. Proff.
  4. 4.  Intermediation ◦ Individuals with money to save need to find those who need to borrow, and vice versa. Financial services do the job lending and collecting payment more easily, cost effectively and expertly Risk management ◦ Without financial services people will focus on saving to cover risk that they might not buy many goods and services Financial services help put money to productive use Mrs. Charu Rastogi, Asst. Proff.
  5. 5.  A person provides a financial service if they ◦ provide financial product advice  to influence a person in making a decision in relation to a particular financial product ◦ deal in a financial product  acquiring/issuing/varying/disposing a financial product  underwriting the securities or interests ◦ make a market for a financial product  through a facility, at a place or otherwise, the person regularly states the prices at which they propose to acquire or dispose of financial products on their own behalf ◦ provide a custodial or depository service  a financial product, or a beneficial interest in a financial product, is held by the provider in trust for the client Mrs. Charu Rastogi, Asst. Proff.
  6. 6.  A financial product is a facility (arrangement or intangible property) through which, or through the acquisition of which, a person ◦ makes a financial investment  the investor gives money to another person and the person uses the contribution to generate a financial return, or other benefit, for the investor  the investor has no day-to-day control over the use of the contribution to generate the return or benefit  Eg: a person paying money to a company for the issue of shares (the company uses the money to generate dividends for the person and the person, as a shareholder, does not have control over the day-to-day affairs of the company) ◦ manages financial risk  manage, avoid or limit the financial consequences to them of particular circumstances happening  Eg. taking out insurance and hedging a liability by acquiring a futures contract or entering into a currency swap ◦ makes non-cash payments  by ways other than making physical delivery of a domestic or foreign currency in the form of notes / coins  Eg: facility for direct debit of a deposit account, a facility for the use of cheques Mrs. Charu Rastogi, Asst. Proff.
  7. 7.  Financial services are economic services provided by the finance industry which comprises of ◦ Deposit-taking Firms  Commercial banks  Credit unions  Finance companies  Property and casualty insurance companies  Pension funds  Investment companies  Mutual Funds ◦ Professional asset management companies ◦ Institutional investors ◦ Securities Firms  Investment banks  Brokers and dealers  Mortgage banks Mrs. Charu Rastogi, Asst. Proff.
  8. 8. Service / Banking & Credit Insurance Securities and BrokerageProduct Market Current account Retail deposits Equities: Broking Travelers cheques LifePersonal Unit trusts Consumer finance Non-life Pension funds Credit cards House mortgages Loan guarantees Exposure credit Corporate finance Non-life Leasing Securities market Exporters’ liabilityCorporate Venture capital Fund management Insurance broking Business loans Corporate advisory Reinsurance International lending services, etc. Foreign currency deposits Mrs. Charu Rastogi, Asst. Proff.
  9. 9.  Intangible; cannot be visually communicated in advertisements Inseparability; of prodn and distn – direct sale Lack of special identity; as products are similar, emphasis is on package (branch, location, staff, promotion) rather than product Heterogeneous; dependent on human factor, technology, same person/ATM may render service differently each time Labour intensive Fluctuation in demand as per economic activity Information based; relatively unexciting nature makes attracting consumer attention and inspiring consumer desire difficult. Mrs. Charu Rastogi, Asst. Proff.
  10. 10.  Changing customer behaviour; longer life spans, increasing urbanization, increased home ownership, higher proportion of women in workforce, better living standards, etc. Deregulation and government intervention; to protect interests of consumers and to facilitate more competitive and efficient industry Intense competition Technological innovation; new products, new payment systems, new forms of distribution and delivery, enhanced MIS Client relationship and quality; aim is to establish long term, multiple service relationship Mrs. Charu Rastogi, Asst. Proff.
  11. 11.  Department of Financial Services, Ministry of Finance, GOI Visit What do they do? What is financial inclusion? What are some of the new initiatives being taken? Mrs. Charu Rastogi, Asst. Proff.