Disintermediation is the process by which savers and borrowers, or sellers and buyers, cut out an intermediary and deal more directly. In finance it usually means money moving out of bank deposits and bank loans into securities markets and funds: a company issues bonds instead of borrowing from its bank, or a saver buys a money market fund instead of holding a savings account. The same word is used in commerce when manufacturers sell direct to customers and bypass wholesalers and shops.
The opposite is intermediation, the classic role of a commercial bank in taking deposits and lending them on. In practice disintermediation is rarely complete. Money usually moves to a different intermediary, such as a fund manager, a platform or a shadow banking lender, a pattern often called re-intermediation.
Disintermediation in plain terms
Think of buying vegetables. For decades most people bought them at a supermarket, which bought from farmers and took a cut. Then farmers' markets and delivery boxes let shoppers buy straight from the grower. The supermarket did not vanish, but it lost some business, and some of the new routes, like delivery apps, became middlemen of their own.
Banks have faced the same thing. Savers who once left all their money in a bank can now put it in funds that pay more, and large companies that once needed a bank loan can borrow directly from investors. The bank loses its cut, and other firms step into parts of its old role.
Origins of the term
The word became common in the United States in the 1960s. Under Regulation Q, the Federal Reserve capped the interest rates banks could pay on deposits, and similar ceilings applied to savings institutions. When market rates rose above the caps, as in 1966 and again in the late 1960s and 1970s, savers withdrew deposits to buy Treasury bills and other securities paying more. Money market mutual funds, first offered in the early 1970s, gave ordinary savers an easy way to do this. The ceilings were phased out after the Depository Institutions Deregulation and Monetary Control Act of 1980, part of a wider wave of deregulation.
Main channels
- Capital markets. Large companies issue bonds and commercial paper directly to investors. Firms in the United States rely far more on market finance than firms in continental Europe, which still borrow mostly from banks; the EU's capital markets union agenda aims to shift that balance.
- Funds and asset managers. Savings that once sat in deposits now flow into mutual funds, ETFs and pension schemes run through investment management firms and other institutional investors.
- Securitization. Banks pool loans and sell them as securities, moving the loans off their balance sheets to investors; see securitization.
- Private credit. Specialist funds lend directly to mid-sized companies, a market that has grown quickly since 2008 as banks faced tighter capital rules; see private credit.
- Fintech and crypto. Peer-to-peer lending, crowdfunding, decentralized finance and stablecoins all promise, to different degrees, to connect users without a bank in the middle.
Effects on banks and the economy
Disintermediation can lower borrowing costs, widen savers' choices and spread risk among more investors. It also changes how monetary policy works, because more credit is set by market prices than by bank lending decisions, and it can weaken banks' traditional relationship lending to small firms.
It has risks too. Activity that leaves banks may leave the strongest safety nets behind: money market funds suffered runs in 2008 and March 2020, and the Financial Stability Board now monitors non-bank financial intermediation for systemic risk. A current debate concerns stablecoins. US banks argued that interest-paying stablecoins could draw deposits away and reduce lending; the GENIUS Act, signed in July 2025, bars stablecoin issuers from paying interest to holders, though disputes continue over rewards offered by exchanges and other third parties.
Re-intermediation and platforms
New technology often creates new middlemen rather than removing them. Payment apps, online marketplaces and embedded finance providers sit between customers and banks, and large technology platforms can benefit from strong network effects. Economists therefore tend to treat disintermediation as a shift in which institutions carry out financial functions, saving, lending, payments and risk-sharing, rather than the disappearance of those functions. Banks have also responded by moving into fee-earning activities, such as wealth management and payments, and by partnering with fintech firms as sponsor banks or providers of banking-as-a-service, so that a bank may still hold the account and the licence even when the customer only ever sees an app.
The pattern also appears outside finance. Online travel booking reduced the role of high-street travel agents, and direct-to-consumer brands sell through their own websites. In each case, the share of value captured by the old intermediary falls, but new gatekeepers, such as search engines and app stores, often collect fees of their own.