intermediation

Intermediation is the process by which an intermediary facilitates exchange, information flow, or resource allocation between two or more parties. By connecting buyers and sellers, lenders and borrowers, publishers and users, or producers and consumers, intermediaries coordinate transactions and reduce transaction costs, information frictions, and risk.

In economics, financial intermediation refers to institutions that transform the nature of assets and liabilities—banks, credit unions, mutual funds—by pooling resources, providing liquidity, and reducing information asymmetry. Non-financial intermediation includes distributors and wholesalers who bridge producers and retailers, as well as information intermediaries such as search engines, review sites, or brokers that aggregate and interpret data.

Platforms that operate as intermediaries have grown with digital networks. Marketplaces, payment processors, and matchmaking services connect multiple sides of a transaction, often earning fees or commissions for their role. Intermediation can enable scale, specialization, and access to capabilities that individual parties lack.

Advantages include lower search costs, risk sharing, liquidity provision, and faster access to goods, services, or information. Potential drawbacks include fees, censorship or opacity, misaligned incentives, reduced competition, and over-reliance on a channel that may amplify systemic risks.

Intermediation is a common feature across commerce, finance, media, and governance, while regulatory, contractual, and competitive considerations shape its design and effectiveness. See also: middleman, broker, mediator.