Reintermediation

Reintermediation can be used in several contexts within finance. Each context involves the introduction of money or an extra step into an already existing process or system.

1. Reintermediation can involve introducing money back into the banking system. Individuals withdrawing funds from non-bank investments such as real estate and depositing into bank and depositary financial-institution accounts constitutes reintermediation.
2. Opposite of disintermediation. Reintermediation involves introducing a middle-man between a supplier and a customer. It creates extra steps in the supply chain and can cause the price to the end consumer to rise. This can be useful in a case where the end consumer might need extra help in picking the right good, and the middle-man can provide expertise on the entire market of goods as part of their service offering.

Reintermediation usually occurs to secure federal deposit insurance on account funds, out of uncertainty about the movement of the financial markets or changes in the interest-rate environment. It is also used in this context in retail channels, such as when an industry decides to return to selling to wholesalers and ceases selling directly to consumers.