It's difficult to know the precise size of the global financial services sector. This is a large group of industries related to banking, lending, and the management of wealth and funds. However, there are few comprehensive metrics for the size of the entire sector. The World Bank itself only collects data from 189 countries and estimates the rest. Meanwhile, the definition and scope of industries that fall within the financial services sector are not consistent among data sources.
Furthermore, reporting is not that readily available on a regular basis or compiled on a global scale in specific financial sector terms. Without a doubt, determining what numerical measurement is the best way to represent the size of a sector has been a subject of much debate.
The following are some ways to measure the size of the financial services sector.
Key Takeaways
- The financial sector involves a large group of industries associated with banking, lending, insurance, investment, and other business activities related to the allocation of wealth and money.
- There are few comprehensive metrics on the global finance sector, and the only way to measure its size is through estimation.
- Financial services are a bedrock for many other industries that rely on loans and credit in order to operate.
- There are several different metrics for estimating the size of the finance sector, such as by Assets under Management (AUM), the market capitalization of financial companies, or the size of the market.
- Although results vary, most estimates place the financial services sector at around 20-25% of the world economy.
A Growing, Shifting Sector
Market estimates project that by the end of 2021, the financial services market is likely to reach $22.5 trillion, growing at a rate of 9.9% from the previous year. This is lower than previous projections, due to the recession caused by the coronavirus pandemic. With global GDP expected to reach $93 trillion in the same year, that would mean that financial services comprise about 24% of the world's economy.
This represents a significant improvement over the financial sector of 2010, which was then struggling to recover from the Great Recession. The sector is expected to grow and shift to mobile and online banking as Millennials and Generation Z become more economically powerful. This growth has led to an increase in funding for startups and fintech companies looking to compete for a share of that business.
Banking and Investment
Another way to estimate the size of the financial services sector is by measuring the banking sector. The global banking sector had an estimated market capitalization of 7.3 trillion euros in the first quarter of 2021, equivalent to $8.58 trillion. Global market capitalization, or the combined value of every listed company on every stock exchange in the world, is estimated to be $56 trillion. Using these metrics, the banking sector accounts for 14% of the global economy.
However, this is an incomplete measurement because it only measures banks whose shares are publicly traded. It will not include information on private banks, government-owned banks, or fintech companies.
Another statistic worth assessing is assets under management (AUM). AUM is a figure that captures the total amount of assets managed by an investment company for its clients. In 2020, global AUM reached $103 trillion, according to Boston Consulting Group. With total global wealth estimated at $431 trillion, that means that the banking and investment sector accounts for just under a quarter of the world's assets.
Financial services are the backbone of the world economy, since most companies rely on credit or loans in order to operate.
Insurance Sector
Another important leg of the financial sector is the insurance industry, which helps companies moderate their business risks. Insurance companies have continued to see growth, particularly in the Eastern part of the world. It is expected that by 2029, Asia-Pacific will account for 42% of global premiums, with China making up 20% of that figure. As of 2020, the U.S. made up 29% of world premiums and China made up 11%.
Worldwide, gross written premiums were projected to reach $5.8 trillion by 2020. With global GDP estimated at around $84.5 trillion for that year, this means that the insurance industry accounts for an additional 6.8% of all economic activity.
The Bottom Line
Although it is difficult to obtain specific figures, the financial services sector is a major building block of the world economy. It consists of banks, investment firms, and insurance companies, all of which play a large role in the workings of the market.
There are several different ways to measure the size of the financial services sector in relation to the world economy. While these estimates vary, most put the financial services sector at around a quarter of the world's economy.
FAQs
Although results vary, most estimates place the financial services sector at around 20-25% of the world economy.
How big is the global financial services industry? ›
According to the latest projection from the Global Market Model in December 2022, the global financial services market achieved a valuation of $25,990.6 billion in 2022, constituting a substantial 26% of the overall global Gross Domestic Product (GDP).
How much of the GDP is Finance industry? ›
In 2020, finance and insurance represented 8.3 percent (or $1.7 trillion) of U.S. gross domestic product. Leadership in this large, high-growth sector translates into substantial economic activity and direct and indirect job creation in the United States.
How big is the US financial sector? ›
Total revenue in the Finance market is projected to reach US$0.58bn in 2022. Total revenue is expected to show an annual growth rate (CAGR 2022-2027) of 11.46%, resulting in a projected market volume of US$1.08bn by 2027.
How important is the financial services industry? ›
The financial services sector is the primary driver of a nation's economy. It provides the free flow of capital and liquidity in the marketplace. When the sector is strong, the economy grows, and companies in this industry are better able to manage risk.
What percentage of the economy is financial services? ›
Although results vary, most estimates place the financial services sector at around 20-25% of the world economy.
How big are global financial markets? ›
Section 1 – Global Capital Markets
Global fixed income markets outstanding decreased 3.2 % Y/Y to $129.8 trillion in 2022, while global long-term fixed income issuance decreased 17.5% to $22.5 trillion.
Which industry is the largest contributor of GDP? ›
Service sector is the largest contributor to GDP in India. Which of the following is the largest contributor to GDP in India? The sector is the largest contributor to the national income of India.
What percentage of GDP is industry and services? ›
U.S. gross domestic product contributions 2000-2021, by sector. In 2021, the agriculture sector contributed around 0.96 percent to the Gross Domestic Product (GDP) of the United States. In that same year, 17.88 percent came from industry, and the service sector contributed the most to the GDP, at 77.6 percent.
What is the biggest industry in the world? ›
The largest industry in the world by revenue is the oil and gas industry.
China's Emerging Influence
The country with the most power constantly shifts as exchange rates and political influence fluctuates. However, most financiers agree that China's influence over the global banking sector is greater than the majority of countries. This is partially due to the country's massive population.
What is the largest financial entity in the world? ›
Comprehensively, the top 10 Global banks companies in the world had a total market cap of $1,879,696 million (as of Mar 31, 2023), with JPMorgan Chase & Co having the highest ($383,549 million), followed by Industrial and Commercial Bank of China Ltd ($235,043 million), and Bank of America Corp ($228,780 million), ...
Is finance the largest industry? ›
The answer, while it might surprise you, actually makes perfect sense. It's the industry that manages, stores and protects money for billionaires, conglomerates, companies—and you. That's right, the financial industry is the largest industry in the world! Totalling $109 trillion, it dwarfs the competition.
How much is the financial services industry worth? ›
The market size, measured by revenue, of the Finance and Insurance industry was $6.0tr in 2023. What was the growth rate of the Finance and Insurance industry in the US in 2023? The market size of the Finance and Insurance industry increased 0.2% in 2023.
Is financial services a growing industry? ›
The financial services market is projected to grow from $25,848 billion in 2022 to $37,484 billion in 2027 at a CAGR of 7.5%. The pace at which the industry is growing is impressive, and businesses in the niche have to keep up with the tempo by implementing the latest technologies and following the major trends.
Why is the financial services industry so heavily regulated? ›
The Securities and Exchange Commission (SEC) regulates the securities markets and is tasked with protecting investors against mismanagement and fraud. Ideally, these types of regulations also encourage more investment and help protect the stability of financial services companies.
How big is the global fintech market? ›
The Global Fintech Market Size was Valued at USD 271.99 Billion in 2023 and the Worldwide Fintech Market Size is Expected to Reach USD 1009.10 Billion by 2033, according to a research report published by Spherical Insights & Consulting.
How much is the global financial system worth? ›
The value of assets of financial institutions worldwide increased overall from 2002 to 2022, despite minor fluctuations and a drop in 2022. In 2022, the assets of financial institutions worldwide amounted to 461.2 trillion U.S. dollars, a small decrease compared to the previous year.
How big is the global trade finance market? ›
Global Trade Finance Market size was valued at USD 45.80 Billion in 2022 and is poised to grow from USD 49.24 Billion in 2023 to USD 87.81 Billion by 2031, at a CAGR of 7.50% during the forecast period (2024-2031).
What is global financial services? ›
Global Financial Services provides financial services. The Company offers loan programs, equipment leasing and financing, debt restructuring, real estate, and investment analysis services.
