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It’s a term you may have heard before but might not know exactly what it means. Reintermediation is a business term that means the process of a company becoming a middleman between two other companies. It can be used to describe when a business adds value to its products or services by connecting buyers and sellers uniquely. This blog post will define reintermediation and explain its benefits in more detail.
What is Reintermediation?
In a world where the internet has made it easier to invest in a wide variety of assets, many people are choosing to move their money away from banks and traditional financial intermediaries. However, during market turmoil, these same investors often seek refuge in the safety of deposit insurance offered by banks and other financial institutions.
This phenomenon, known as re-intermediation, can profoundly impact the stability of the financial system. When capital flows back into intermediaries during times of stress, it helps to reduce the risk of bank runs and other destabilizing events. Re-intermediation can therefore be a critical tool for secure bank deposits and maintaining financial stability during periods of turbulence.
Difference between Disintermediation and Reintermediation
The terms disintermediation and reintermediation are often used interchangeably, but there is a key distinction between the two. Disintermediation occurs when intermediaries are removed from the supply chain, while reintermediation occurs when new intermediaries are introduced. This distinction is important because it highlights the different motivations for each process.
Disintermediation typically provides a more efficient supply chain and reduces costs, while reintermediation often happens to add new value or improve the customer experience. As a result, disintermediation typically leads to lower prices for consumers, while reintermediation can lead to higher prices. Nevertheless, both processes can be beneficial for businesses and consumers alike.
Related: Disintermediation
What is intermediation?
Intermediation is matching borrowers with lenders, typically through a third-party such as a bank. This can be done in several ways, but the most common method is for the intermediary to take deposits from savers and then use those funds to lend to borrowers who need money. The mediator makes money by charging fees or interest on the loans they originate.
The benefit of this system is that it allows savers to earn interest on their deposited funds and borrowers to access capital that they might not otherwise be able to get. In recent years, intermediation has come under increased scrutiny due to banks’ role in the financial crisis of 2008. Nevertheless, it remains a crucial part of the global financial system.
What is the advantage of Re-intermediation?
In today’s fast-paced, globalized economy, Business Models are always looking for ways to improve efficiency and cut costs. One way to do this is by outsourcing certain business activities to intermediaries, who can often provide these services more cheaply and efficiently than the company itself. This practice, known as reintermediation, can benefit both businesses and consumers.
First, it can help to improve communication between the different parties involved in a transaction. Second, it can provide quality control, as intermediaries are typically experts in their field and can ensure that the service being provided meets the customer’s standards. Finally, reintermediation can lead to increased competition, driving down prices and improving the quality of goods and services.
What is a reintermediation example?
Reintermediation is the process of reassembling buyers, sellers, and other partners in a traditional supply chain in new ways using the Internet. This can be done for various reasons, such as to bypass intermediaries, create new efficiencies, or reach new markets.
For example, General Motors Corp. uses the Internet to sell cars directly to consumers, bypassing dealerships and insurance companies skirting their agents to sell products and services. Similarly, insurance companies use the Internet to sell products and services, avoiding agents. In each case, reintermediation has led to a more efficient and effective marketplace.
What are electronic intermediaries?
An electronic intermediary, also known as an e-intermediary, is a type of business that facilitates transactions between parties through information technology like electronic commerce OR E-Commerce. E-intermediaries typically connect manufacturers with customers and provide a platform for them to conduct transactions. The use of e-intermediaries has grown in popularity due to their advantages over traditional intermediaries, such as bricks-and-mortar businesses.
E-intermediaries can reduce transaction costs by connecting buyers and sellers directly and providing a wide range of services that would otherwise be unavailable or prohibitively expensive. In addition, e-intermediaries offer buyers and sellers a greater degree of choice and flexibility regarding products and services. As a result, they have become an essential part of the global economy.
Conclusion
So overall, Reintermediation has been on the rise in recent years as technology has made it easier for companies to connect with customers and suppliers. By cutting out the middleman, companies can save money and time, but they may be sacrificing quality or customer service.
When done correctly, reintermediation can provide a valuable service by helping to connect buyers and sellers quickly and efficiently. Electronic intermediaries are becoming increasingly popular as more people move online, and we can expect to see even more innovation in this space in the years to come.
Have you used a re-intermediary to buy or sell products or services? What was your experience like?
FAQ
What does Countermediation mean?
In the business world, change is the only constant. So to stay ahead of the competition, companies must constantly evolve and adapt their strategies. One way that companies can stay ahead of the curve is by countermediating.
Countermediation is the process of creating a new intermediary by an established company. This allows the company to have more control over its products and services and better meet its customers’ needs. By investing in creating a new intermediary, companies can stay ahead of their competition and keep their customers happy.
Is disintermediation good or bad?
Disintermediation is the direct connection between a producer and consumer of goods or services without the need for an intermediary. In the past, middlemen such as distributors, logistics providers, and brick-and-mortar retailers added considerable cost to the final price of goods and services. By cutting out these middlemen, disintermediation can lower consumers’ prices. In addition, disintermediation can simplify the process of acquiring goods and services since there are fewer steps involved.
Is Apple disintermediation?
Apple is an interesting company because they are constantly changing how they do business. For example, in the early days of the iPhone, Apple sold its devices through carriers. However, they have started to sell their devices directly to consumers in recent years, bypassing traditional retail chains. This has led to a debate about whether Apple engages in disintermediation or reintermediation.
Apple is cutting out the middleman by selling its devices directly to consumers. But, on the other hand, they are still selling their devices through carriers, just differently. In either case, Apple is constantly innovating and changing how they do business.
What are supply chain middlemen?
In the business world, the term “middleman” is often used to refer to someone who acts as an intermediary between two parties. For example, in the supply chain, a middleman may be a distributor who buys goods from a manufacturer and then sells them to a retailer.
The middleman typically charges a higher price than the manufacturer, which allows them to make a profit. Salespeople are often considered middlemen as well since they match buyers with sellers. While middlemen can often play an essential role in business transactions, they can also add unnecessary cost and complexity. In some cases, it may be possible to eliminate the middleman.
What is Supply chain management?
Most people are familiar with the concept of a supply chain, even if they don’t know the term. A supply chain is simply the system that moves a product from the supplier to the customer. Supply chain management (SCM) oversees and coordinates this system to ensure that it runs smoothly and efficiently.
The first step in SCM is to identify and assess the distribution channel, including all supply channel partners (manufacturers, suppliers, distributors, etc.). The next step is developing and implementing plans for managing these partners, including short-term and long-term goals.
What is corporate finance?
Corporate finance is the division of finance that deals with how corporations address funding sources, capital structuring, and investment decisions. To maximize shareholder value, corporate finance professionals must carefully manage the business’s distribution of equity and debt.
They must also work closely with supply channel partners to allocate resources efficiently and minimize risks. By carefully managing these financial aspects of the business, corporate finance professionals can help create a stable and profitable company.
