What Is Finance Industry Analysis?

Banks, consumer financing institutions, credit card companies, investment firms, credit unions, insurance companies, and other organizations involved in the management of monetary instruments make up what is known as the finance industry. In order to make sound economic decisions, various individuals and entities need in-depth information about the overall performance of the finance industry, as well as performance information on specific sectors. Finance industry analysis is complex, but relies on factors such as geography, past performance, current trends, and future outlook. Products offered, government regulation, factors that influence economic growth, and performance of the leading businesses are also analyzed to help forecast what might happen in the future.

Industry analysis, whether for the finance industry or another industry, uses many of the same basic factors. First, analysts must narrow down the geography involved, such as state, country, region, or global financial services. Once the location is determined, the size of the industry is measured, along with any regulatory considerations involved. Trends within the industry are identified, based on past and present performance. Future projections, known as forecasts, are then estimated and summarized into reports, articles, or other published opinions, collectively known as a finance industry analysis.

Also known as the finance and insurance industry or simply financial services, the finance industry wields great influence over other industries and economies. Availability of credit, performance of investment vehicles, costs and risks associated with insurance, and similar factors can greatly affect the cost of living, cost of goods, and government tax revenues of a particular region. Analytical results can also indicate consumer confidence and the future growth potential for certain industries. Monitoring and analyzing the performance of various sectors within the finance industry helps investors, businesses, consumers, and government agencies make economic decisions about the future. Economic experts and numerous interested organizations specialize in such finance industry analysis to help in the decision-making process.

For example, using finance industry analysis, economic experts can spot a downward trend in consumer financing. Such a trend might indicate that fewer consumers are taking out personal loans, thus paying less in interest charges. Alternatively, the downward trend could indicate that fewer lenders are approving loans. Further analysis would be needed to determine if other finance industry sectors are experiencing the same downward trend, thus indicating possible economic concerns.

Changes in government regulations are another area of intense interest regarding finance industry analysis. When tighter restrictions are placed on financial services, the effects can be monitored through careful industry analysis that compares pre-regulation and post-regulation performance. Experts can then expound on the consequences or benefits of the new regulation and projections for how the regulations will affect future growth of an industry.