Overview of Finance Domain
"Finance Domain” term is generally used to refer to the skills and jobs that fall under the finance industry or financial services. There is a potential source of confusion regarding what we refer to with the term Finance Domain. On the one hand, there is a function called finance that is common to all business enterprises, in every industry, and on the other hand, we have financial institutions. The knowledge of the finance domain enables possible career paths within the financial services industry or with financial institutions.
There is a potential source of confusion regarding what we refer to with the term Finance Domain. On the one hand, there is a function called finance that is common to all business enterprises, in every industry and we have covered these finance processes under Functional Skills. On the other hand, there is a financial services industry. Then we have a term that refers to all financial institutions like Banking, Brokerage Houses, and Insurance, etc. The knowledge of the finance domain enables possible career paths within the financial services industry or with financial institutions.
The Finance Function
The finance function encompasses a variety of functions, activities, and processes. It compasses financing functions, budgetary functions, risk and return management, cash flow management, cash management, financial management, risk and governance, and many more associated functions. There are various financial institutions that play a major role in the career of professionals with financial domain knowledge.
Major Players in Finance Market
Let us discuss the major players in the financial market.
Banks:
A "commercial bank" is what is commonly referred to as simply a "bank". The primary operations of banks include:
- Keeping money safe while also allowing withdrawals when needed
- Issuance of checkbooks so that bills can be paid and other kinds of payments can be delivered by post
- Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home, property, or business)
- Issuance of credit cards and processing of credit card transactions and billing
- Issuance of debit cards for use as a substitute for checks
- Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)
- Provide wire transfers of funds and Electronic fund transfers between banks
- Facilitation of standing orders and direct debits, so payments for bills can be made automatically
- Provide overdraft agreements for the temporary advancement of the Bank's own money to meet monthly spending commitments of a customer in their current account.
- Provide an internet banking system to facilitate the customers to view and operate their respective accounts through the internet.
- Provide Charge card advances of the Bank's own money for customers wishing to settle credit advances monthly.
- Provide a check guaranteed by the Bank itself and prepaid by the customer, such as a cashier's check or certified check.
- Notary service for financial and other documents
- Accepting deposits from customers and provide credit facilities to them.
Insurance
Insurance brokerage - Insurance brokers shop for insurance (generally corporate property and casualty insurance) on behalf of customers.
Insurance underwriting - Personal lines insurance underwriters actually underwrite insurance for individuals, a service still offered primarily through agents, insurance brokers, and stock-brokers. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and annuities, life insurance, retirement insurance, health insurance, and property & casualty insurance.
Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses.
Other financial services
Intermediation or advisory services
These services involve stock brokers (private client services) and discount brokers. Stock-brokers assist investors in buying or selling shares. Primarily internet-based companies are often referred to as discount brokerages, although many now have branch offices to assist clients. These brokerages primarily target individual investors. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest, such as large companies, wealthy individuals, and investment management funds.
Private equity
Private equity funds are typically closed-end funds, which usually take controlling equity stakes in businesses that are either private or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets
Venture capital is a type of private equity capital typically provided by professional, outside investors to new, high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the business.
Angel investment
An angel investor or angel (known as a business angel or informal investor in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
Conglomerates
A financial services conglomerate is a financial services firm that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated i.e. bad things don't always happen at the same time. As a consequence, economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts.
Debt resolution is a consumer service that assists individuals that have too much debt to pay off as requested but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards, or in some cases merchant accounts. There are many services/companies that can assist with this. These can include debt consolidation, debt settlement, and refinancing.
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