Fifty years ago, financial services have accounted for less than 3 percent of GDP in the US and developed Europe, which at present, is mounted to almost 10 percent (Stephenson 2005). Thus, the financial services industry is one of the many industries that produce rapid growth in the world economy (Stephenson 2005).
The modern financial industry witnessed 1986 as the ‘big bang’ era that opened London up more widely to international competition through electronic trading (Harris 1998). The onset of computer technology and global telecommunications systems has undoubtedly brought rapid changes that likewise brought changes to financial services. A widening of shared ownership and investment opportunities from few to many has been heralded by this development (Harris 1998). This development has bid adieu to the usage of a stockbroker, as it has now been possible for one to buy and sell certain financial investments through a visit to the local bank or using the computer.
Before the onset of advanced technology and computerization, there used to be a clear difference between a retail bank and a building society, or an insurance company, which all had a separate business from the retail bank. Today, financial institutions cannot be easily differentiated as the differences between them are disappearing while they continuously compete against each other to sell services that used to be sold by just one portion of the sector (Harris 1998). The past witnessed each firm with a narrow band of services, which is offered to a wide range of consumers and business clients. Even the payment system was controlled by commercial banks that have the authority to clear checks and drafts. Today, payments and money are facilitated electronically in volumes that are not easily handled in the physical form (Johnson 2000). Mortgage finance, which is now traded as securities, is likewise available from a wide range of sources while securities firm offer corporate and government securities as investment avenues (Johnson 2000). Even insurance companies provide products that compete with investments, which can be obtained through securities firms. It may be inferred that the dynamics of the banking industry have been permanently changed by mutual funds, which is an outcome of recent technology advancement (Johnson 2000). The same advancement has blurred traditional roles, causing difficulty to distinguish the product of a commercial bank from that of another financial institution. Banks are now selling insurance, with some having taken over some insurance firms. Virgin Boots offers a range of insurance companies in much the same way as Marks amp.Spencer sells investment products and pensions (Harris 1998). Likewise, if one needs a mortgage, he can go to a building society, a bank, an insurance company, and even a local supermarket. Financial services also witnessed the rapid growth of telephone call centers and helplines with their increased staffing jobs. A process of significant change in a period of new alignments in domestic markets and increased global competition is currently faced by the financial services industry (Johnson 2000). For several years, bank deposits have served as the basis for the country’s payment mechanism, until such time electronic banking occurred, replacing physicalcurrency.