Cutting out the ‘middleperson’

Disintermediation (cutting out the middleperson)

Disintermediation is when a corporate borrower goes directly to investors to borrow funds, rather than through a bank or other intermediary, e.g. through the use of corporate bonds or retail bonds.

When the trade is direct the investor usually gets a better rate of return and the borrower pays less interest as the intermediary would charge a commission. Disintermediation was accelerated following the 2008/09 global financial crisis with many companies looking to diversify their funding sources and utilise financial markets directly.