Intermediaries

Intermediaries

Intermediaries are individuals or organisations that act as a link between two parties in a transaction, helping to facilitate the exchange of goods, services or financial assets. Common examples include brokers, agents, financial institutions, and online platforms that bring buyers and sellers together. In finance, intermediaries help allocate capital efficiently by connecting investors with borrowers or companies seeking funds.

Importance of intermediaries

Market efficiency

Intermediaries streamline processes and reduce transaction costs by handling key tasks such as negotiation, documentation and settlement. This improves efficiency and helps markets operate more smoothly.

Expertise and specialisation

They provide specialist knowledge that assists clients in navigating complex financial, legal or commercial environments. Their experience and networks also enable faster and more accurate decision-making.

Risk management

Intermediaries often help manage risk by verifying information, conducting due diligence or offering protection such as insurance or guarantees. This reduces the likelihood of disputes or financial loss.

Access to markets

They connect buyers and sellers who may not otherwise find each other. In doing so, they improve liquidity, expand opportunities and ensure that demand and supply are matched effectively.

Convenience

By handling the administrative and logistical aspects of transactions, intermediaries allow both parties to focus on their core objectives. This saves time and simplifies the transaction process.

Types of intermediaries

• Financial intermediaries: Banks, credit unions and superannuation funds that facilitate the flow of capital between savers and borrowers.
• Brokers and agents: Professionals who arrange transactions on behalf of clients in sectors such as real estate, insurance or financial markets.
• Wholesalers and distributors: Businesses that purchase goods in bulk from manufacturers and sell them to retailers or end customers.
• Online platforms: Digital marketplaces and technology platforms that connect service providers with users, often automating parts of the process.

Understanding the role of intermediaries is vital in both business and finance, as they support efficient transactions, reduce barriers and help manage risk across various sectors of the economy.