Scope of financial services has changed over the years. Economies of scope were very much in the limelight and different schools of thought gave different views. The article below explores some of the aspects of financial services industry.
There was extensive deregulation of the financial services industry during the 1990s. This occurred mainly in the United States of America and Europe. This in turn led to the consolidation of the insurance as well as the banking sectors.
The reason may be attributed to the fact that more and more companies belonging to these sectors tried to consolidate their position in the new regulatory market conditions. There was ” cross- industry” as well as “cross-border” consolidation. There was a new concept, which was hovering large on the corporate stalwarts.
Economies of scope was of primary importance. There was a debate whether offering a “narrow range” of financial products was desirable or offering varied categories of products was desirable. There have been instances, which proved that the market value gets destroyed if the path of diversification is opted for.
If we take into consideration the case of Western Cape to explore the scope of financial services industry it is observed that there are many parameters, which influence the financial services industry.
During the period 1995 to 2003, the financial services industry contributed 12.3% towards the gross domestic product.
Financial services accessibility
39.5% of Western Cape’s population did not bank. This was in sharp contrast against the 54.6% of the total population of Western Cape.
Studies reveal that during the same period as many as 65,000 people were engaged in financial services industry. Sectoral employment grew by 1.1% every year. It was also observed that since growth in the rate of employment has been comparatively slower as compared to “output growth”, there has been an increase in labor productivity simultaneously with capital intensity.