Disintermediation

Disintermediation: What it is and why it matters

Disintermediation is the removal of intermediaries from a supply chain or transaction so that producers and consumers (or investors and issuers) deal directly. The goal is usually to lower costs, speed up delivery, or both. While the concept appears across industries, it has particular significance in finance, retail, travel, and digital services.

Key takeaways

• Disintermediation eliminates middlemen to reduce markups and shorten transaction times.
• The internet enabled direct connections between producers and buyers, but new digital intermediaries have also emerged.
• In finance, disintermediation lets investors bypass banks or brokers to access financial products directly.
• Cryptocurrencies implement disintermediation via peer-to-peer transactions secured by blockchain consensus.
• Cutting out intermediaries can shift operational burdens—logistics, marketing, customer service—back onto producers.

How disintermediation works

Removing an intermediary means an activity once handled by a third party must be covered by either the producer or the buyer. Examples:

• A consumer buys directly from a manufacturer or wholesaler instead of through a retailer.
• A business orders directly from a manufacturer rather than using a distributor’s sales network.
• An investor purchases securities directly, rather than through a broker or bank.

The benefits—lower price and faster delivery—arise because the intermediary’s markup and processing steps are removed. The trade-off is that the producer must handle tasks such as order fulfillment, marketing, customer support, and shipping.

Benefits to consumers and businesses

• Lower prices when markups are eliminated.
• Potentially faster transactions and simplified communications.
• More direct access to product information and customization.
• New market access for small producers via online storefronts and social media.

These benefits are realized when the tasks formerly done by intermediaries can be executed more efficiently or cheaply by the parties involved.

Challenges and considerations

Disintermediation introduces operational and strategic challenges:

• Logistics: Fulfilling and shipping many smaller direct orders can be costlier than bulk distribution.
• Sales and marketing: Producers must invest in storefronts, advertising, and customer service.
• Scale: Intermediaries often bring economies of scale—warehousing, distribution networks, and negotiated rates—that are hard to replicate.
• Reintermediation: New intermediaries (marketplaces, ad networks, app stores) often appear to solve the complexity producers face.

Before eliminating intermediaries, businesses should assess whether they can deliver the full set of services customers expect at competitive cost.

The role of the internet

The internet made disintermediation practical at scale by connecting buyers and sellers directly. E-commerce platforms, social media, and direct-to-consumer websites let producers reach customers without traditional retail channels.

However, many producers find it difficult to match the reach, logistics, and convenience of large marketplaces. As a result, platforms such as Amazon, eBay, and Etsy function as new digital intermediaries that aggregate choice, provide trust signals, and handle fulfillment and payments.

Cryptocurrencies and blockchain

Cryptocurrencies are a form of disintermediation in finance. Blockchain networks enable peer-to-peer transactions without banks or central authorities. Consensus mechanisms (proof of work, proof of stake) and cryptographic protocols replace trusted third parties for transaction validation and record-keeping. This model reduces reliance on traditional financial intermediaries but introduces new technical and regulatory considerations.

Examples across industries

• Electronics: Manufacturers (Apple, Google, HP) sell directly via branded stores and websites, bypassing some retail steps.
• Cosmetics and consumer brands: Many brands shifted from department-store distribution to direct online sales.
• Travel: Consumers can book flights, hotels, and rental cars directly or use online travel agencies; the latter often act as intermediaries buying inventory in bulk and reselling it.
• Advertising and services: Tools like Google AdSense and social platforms let advertisers reach audiences directly, though marketing agencies and platform intermediaries remain common.

When disintermediation occurs

Disintermediation happens whenever a supply-chain step is eliminated—when a buyer contacts a provider directly, or when a company internalizes services previously outsourced to distributors or platforms (e.g., building its own delivery network rather than relying on carriers).

Disintermediation in e-commerce

E-commerce was expected to fully remove intermediaries, but the reality is mixed. Consumers value broad selection, convenience, reviews, and fast shipping—services that large marketplaces provide. Consequently, many transactions have simply shifted to new kinds of intermediaries that bundle these services.

Bottom line

Disintermediation can lower costs and speed transactions by cutting out middlemen, but it also transfers responsibilities—logistics, marketing, customer support—to producers. The internet and blockchain technologies have expanded opportunities for direct interactions, yet new intermediaries frequently emerge to solve the operational complexities that arise. Businesses should weigh cost savings against the added operational demands before removing intermediaries.