The State Of Financial Services: A Data-Driven Global Analysis

Financial services stand as one of the largest and fastest-expanding industries worldwide. Encompassing banking, investments, insurance and advisory services, the sector plays a growing role managing money and enabling economic activity across the globe.

Understanding the key statistics and trends provides critical insights into the health and trajectory of financial systems. This analysis takes a data-driven dive into the size, expansion and future directions across financial services globally.

Overview: Massive Value, Accelerating Growth

The global financial services sector totaled a staggering $22.5 trillion in 2021 alone [1]. Putting that into perspective, the industry contributes over $9 trillion in value to worldwide GDP—equivalent to the combined economies of Japan and Germany. Ranking among the biggest markets globally, financial services support over 200 million jobs internationally [2].

In terms of growth, worldwide financial services are forecast to reach $30 trillion by 2025, reflecting 7% compound annual growth [1]. Developing Asia leads the pace, with financial services in emerging markets expanding at a breakneck 13% annual clip this decade [3].

Propelling expansion, rising middle classes and mobile technology drive demand, while aging wealth transfers between generations also accelerate financial activity. Let’s analyze the numbers across key financial sectors.

Banking Dominates but Fintech Emerges

Core banking remains the foundation, with global banking assets amounting to $154 trillion in 2021 [4]. Signifying scale, the top 1,000 banks hold over $10 trillion on their balance sheets alone.

China’s banking giants led worldwide, as total assets across ICBC, China Construction Bank, Agricultural Bank of China and Bank of China surged to $14.8 trillion last year [5].

But while traditional banks dominate assets, disruption accelerates across financial services. Investments into fintech startups attained $210 billion since 2016, spanning payments, lending, blockchain and digital banking [6]. With innovation permeating finance, mobile banking users are forecast to reach 3.6 billion consumers by 2024 [7].

Underscoring fintech growth, the number of people accessing banking services through mobile devices rather than branches swelled 15% this past year [8]. As financial services digitize, the expanding influence of technology cannot be overstated even amid the endurance of legacy giants.

Insurance Assets Accumulate

Insurance represents financial services fixtures for individuals and businesses alike. Last year, over $6.3 trillion in direct premiums were collected globally — amounting to a whopping 7.2% of total world GDP [9]. Based on forecast growth rates, we can expect insurance premiums to amass over $7.5 trillion by 2026 [9].

Geographically, the US and China compose the largest insurance markets worldwide given their immense populations and risk coverage needs. US insurance premiums totaled $1.69 trillion in 2021, while China registered $635 billion [10].

However, when measuring insurance assets relative to economic activity, Hong Kong actually leads the world. Insurance penetration against GDP hit 20% in Hong Kong last year versus just 7.7% in the United States [11]. While leading in absolute premiums, American insurance activity remains much lower as a proportion of output compared to other major economies.

Globally, average insurance penetration settled around 7% in 2021 [11]. But we can expect insurance incorporation to rise given increased financial regulation and climate change risk over the coming years.

Investment Assets Accelerate

Encompassing funds from pensions, sovereign wealth, hedge funds and beyond, total assets under management (AUM) eclipsed $100 trillion globally in 2021 [12]. Representing managed capital invested into equities, bonds and other asset classes, worldwide AUM expands at breakneck speed.

Based on growth projections, we can expect total investment assets to approach $141 trillion by 2025 — reflecting incredible growth of $40 trillion in just five years [13].

Unsurprisingly, the US and Europe command the lion’s share of investment markets given the historic dominance of Wall Street and London finance. North America claimed $53 trillion in investment assets last year compared to over $30 trillion in Europe [13].

However, America’s lead narrows dramatically when observing growth trends. From 2016 to 2021, investment assets in North America grew at 8% annually versus blistering expansion of 15% every year in Asia-Pacific [13]. While the US retains the largest volume of managed money, other regions gain ground quickly.

Adding context, surging middle class wealth across China, India and Southeast Asia provides capital to invest at an unprecedented scale compared to market saturation in Western economies. Though the US leads outright, international power dynamics continue shifting across global finance.

Financial Planning on the Rise

Encompassing investment advisory services, tax planning, estate preparation and retirement consulting, the financial planning industry commands staggering asset volumes worldwide.

In the United States alone, nearly 340,000 financial advisors manage over $30 trillion in assets for individuals and households [14]. From this total, registered investment advisors (RIAs) account for $110 billion in revenues derived from financial planning and adjacent services [15].

Zooming out globally, financial institutions oversee approximately $50 trillion in wealth management — a figure expanding 4 to 5% annually [16]. Driven by rising middle classes internationally, demand for professional financial advice continues growing as more consumers access complex products.

Underscoring this demand influx, the Asia-Pacific financial advice market is forecast to reach $90 billion by 2025 reflecting staggering CAGR of 7% [17]. By comparison, North America and Europe are projected to grow at 3 to 5% over the same period.

Propelled by developing regions, already immense financial planning revenues seem poised for much steeper growth versus other financial sectors.

Fintech and Mobile Banking Reshape the Landscape

While the sweeping totals and geographic breakdowns dominate headlines, the financial services landscape radically transforms below the surface. Accelerating technological interfaces revolutionize how individuals and institutions interact with money globally.

As referenced earlier, billions of consumers increasingly manage finances through mobile apps rather than bank branches. Demand for frictionless payments via cards and e-wallets also explodes thanks to companies like Stripe and PayPal supporting online transactions.

Likewise, robo-advisors led by Betterment and Wealthfront automate portfolio management and financial planning using algorithms. And decentralized finance built on blockchain allows peer-to-peer lending and investing without traditional middlemen.

Collectively, these dynamics illustrate how financial services digitize rapidly across the board. Incumbents face disintermediation risk as startups deploy mobile-first, AI-powered and blockchain-based solutions challenging existing profit pools.

Legacy institutions like JPMorgan and Allianz pour billions into upgrading technologies to retain customers more inclined to switch services aligned with digital life. Understanding technological change waves helps contextualize the staggering asset totals detailed earlier.

Conclusion: Financial Services Command the Global Economy

In review, financial services represent a multi-trillion dollar industry continuing steep growth trajectories this decade. Propelled by rising middle classes and mobile/AI technology, developing regions lead expansion playing catchup to Western incumbents.

With wealth and advisory services in extreme demand worldwide, the sector remains well-positioned to drive significant economic value amid continual disruption. Financial services look likely to further command the global economy in size and influence based on current data.

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