Often, this process will occur for a company or individual to save on costs or cut down on time to sell a product or service. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkArticle Link to be Hyperlinked
How Does Disintermediation Work?To better understand the meaning of disintermediation, it’s first essential to understand what it means to “intermediate.” An intermediary bridges the gap between two separate parties and help them achieve specific goals. For example, a retail giant like Walmart acts as an intermediary for brands showcased on its shelves as it is giving the buyers a platform to purchase their products. Similarly, some banks act as intermediaries between investors and low-risk financial instrument providers when they offer a platform to invest in government bonds. To disintermediate will lead to eliminating the representatives like Walmart or banks so that the brands communicate and sell directly to their customers. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkArticle Link to be Hyperlinked Intermediaries in finance have always provided a crucial role in the financial industry by acting as the middleman between entities and allowing a smooth transition from user to product or service. Some would even say that this system has contributed to the rise of globalism and has allowed businesses to scale their operations. A few examples of intermediaries in finance include Insurance agents, stockbrokersA stockbroker is an individual or company qualified enough to trade securities in the financial markets on behalf of financial institutions, individual and institutional investors, and organizations. They can work either independently as a professional trader or broker-dealer or associate with a brokerage firm.read more, and bankers. In many cases, without intermediaries, individuals wouldn’t have access to certain goods or services. The same could be said for some businesses. Without the middleman, they wouldn’t have the labor and resources necessary to get the job done. Disintermediation Examples
Technology’s role in disintermediationNew technology is being developed every day, making people’s lives easier and giving them access to opportunities they wouldn’t be eligible for otherwise. This is becoming a problem for many intermediaries as technology is replacing their processes, making them more comfortable and efficient. If businesses don’t have to cover the overhead costs associated with brick and mortarBrick and Mortar is a kind of business that offers goods and services to its customers face-to-face through a physical outlet. It represents a physical presence of a business. read more stores, they can pass those savings along to the consumer. The internet is a significant driver of disintermediation, allowing people to become closer than ever and interact with one another. The internet also allows businesses and other entities to communicate with potential consumers directly. If a company decides they want to begin selling directly to the consumer, they can skip the retailer and directly establish a relationship. Examples of such brands include Lulus and Kylie Cosmetics that ship to different countries as well. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkArticle Link to be Hyperlinked CryptocurrenciesCryptocurrency refers to a technology that acts as a medium for facilitating the conduct of different financial transactions which are safe and secure. It is one of the tradable digital forms of money, allowing the person to send or receive the money from the other party without any help of the third party service.read more such as BitcoinBitcoin is a digital currency that came into existence in January 2009, speculated to be created by Satoshi Nakamato, whose true identity is yet to be authenticated. It provides lower transaction fees than the traditional online payment systems, is controlled by the decentralized authority, and is not like government-issued currencies.read more and Ethereum are getting all the attention this year as both digital currencies have experienced unprecedented price growth, recently hitting all-time high prices. Many people are interested in the speculative prices of currencies. However, it’s the technology behind these digital currenciesDigital currency is a currency found only in an electronic form as it is used for trading over the internet. They are famous for allowing transparent and secured digital payments. Although their popularity is constantly growing, their adoption as a reliable alternative to physical money is nowhere close. Some of the popular digital currencies are Ethereum, Bitcoin, and Litecoin.read more that’s the intriguing part. Fiat moneyFiat money is a currency that is declared by the government to be legal tender and has no physical backing such as gold; rather, the value of fiat money is derived from the market's demand-supply relationship. India's and America's fiat currencies are the India Rupee and the US Dollar, respectively.read more or paper currency is controlled by a centralized figure, like a central bank. On the other hand, Cryptocurrencies will utilize Blockchain technology, which is decentralized and not controlled by a central figure. Instead, the transactions are entered into a database and stored on a massive network or servers. The data can be observed by everyone on the network live as it’s updated. Risks in DisintermediationAlthough companies that practice disintermediation can receive certain benefits like increased profit marginsProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more and less transit time, there are known risks associated with the practice. These risks can include:
Recommended ArticlesThis has been a guide to Disintermediation and its Meaning. Here we discuss how does it work, the role of technology along with examples and risks involved. You may also have a look at the following articles to learn more –
What occurs when a business sells directly to the customer online and cuts out the intermediary?The term disintermediation refers to the process of cutting out the financial intermediary in a transaction. It may allow a consumer to buy directly from a wholesaler rather than through an intermediary such as a retailer, or enable a business to order directly from a manufacturer rather than from a distributor.
Which of the following refers to a situation in which a business sells directly to the customer online and cuts out the middle man?Key Takeaways
Business-to-consumer refers to the process of businesses selling products and services directly to consumers, with no middle person. B2C typically refers to online retailers who sell products and services to consumers through the internet.
Which of the following represents businesses buying from and selling to each other over the Internet?E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer or consumer-to-business.
What was the original term for a company operating on the Internet?Key Takeaways. A dotcom, or dot-com, is a company with a business model that is dependent on the operation of a website. Dotcoms get their name from the .com at the end of their website URLs. The term is now used primarily to describe a company that was created in the early days of the World Wide Web, the 1990s.
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