Financial Services: Sizing the Sector in the Global Economy

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.

A Growing, Shifting Sector

Market estimates project that the financial services market is likely to reach $33.54 trillion by 2024, growing at a rate of 7.7% from the previous year. With global GDP expected to reach $109.53 trillion in the same year, that would mean that financial services comprise about 31% 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 €5.8 trillion in the fourth quarter of 2023, equivalent to $6.39 trillion. Global market capitalization, or the combined value of every listed company on every stock exchange in the world, is estimated to be over $111 trillion in 2023. Using these metrics, the banking sector accounts for 5.75% 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). This figure captures the total amount of assets managed by an investment company for its clients. Global AUM reached $120 trillion in 2023, according to Boston Consulting Group. With total global wealth estimated at $477 trillion, that means that the banking and investment sector accounts for just over a quarter of the world's assets.

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 2022, the U.S. made up 44% of world premiums and China made up 12%.

Worldwide, gross written premiums reached $2.76 trillion in 2022. With global GDP estimated at around $101.23 trillion for that year, the insurance industry accounts for an additional 2.72% 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.