7. Digital Disintermediation

Question 1

What does disintermediation mean?

Answer 1

Removing the middleman from business transactions

Question 2

What does intermediation mean?

Answer 2

Adds a middleman where a business has previously sold directly to customers.

Question 3

Does disintermediation add or remove a dependency to the process?

Answer 3

Remove

Question 4

True or false: disintermediation improves the value of an existing product or service?

Answer 4

True

Question 5

Has the rise in digital banking created more or less demand for things like comparison websites?

Answer 5

More. Customers prefer platforms, aggregators, intermediaries and comparison sites due to their speed and transparency. Those banks not on comparison sites have seen a fall in profit margins.

Question 6

What is an intermediary?

Answer 6

An institution that borrows money from surplus sector of the economy and lends to deficit sector,e.g. banks and building societies

Question 7

What is digital disintermediation? Provide an example of this.

Answer 7

Where the real life intermediary (middle man) is replaced by a technological solution that acts as the intermediary within a transaction.

Example - Peer 2 Peer payments that make payments directly and don’t go through a MasterCard or via solution. This is better for customers as there is no payment fee.

Question 8

What is digital intermediation? Provide an example of this.

Answer 8

Where a digital tech solution is injected into a transaction or process where there wasn’t an intermediary before.

This can be an additional layer added between either:
- the buyer and seller
- the customer and supplier
- the bank and customer

Examples - aggregator/comparison sites displaying providers and servicesm
- apple pay, adds a layer between the cardholder and providers

Question 9

How do aggregator websites help the borrower? (3)

Answer 9

1. Quicker - you get tailored results based on the data you input
2. Cheaper - find better products through comparison, encourages competition which leads to better pricing
3. Better products/services - the increased competition puts pressure on traditional banks to come up with new digital solutions

Question 10

How do aggregator websites help the lender? (2)

Answer 10

1.By generating more leads which more than makes up for the extra fees they may need to pay.

2. Helps to remove customers’ lack of trust in banks

Question 11

What are the following examples of:
- funding options
- funding xchange
- British business bank
- federation of small businesses (FSB)

Answer 11

Successful aggregator sites which have loan comparison pages.

Question 12

What is the British Business Bank?

Answer 12

Government owned economic development bank that has an aggregator function within it.

One of the only intermediaries that has traditional banks alongside new alternative lenders on the same platform.

Question 13

How can a lender register with the British Business Bank?

Answer 13

Must be accredited by the bank as an add on to the accreditation that they have already received from the government

Question 14

True or false: Clear score is an example of a digital intermediary

Answer 14

True. Uses data to match users with products best suited to them based upon their credit score.

Question 15

What was ESME?

Answer 15

NatWest provided loans to businesses under the heating trading name of ESME (so that it was not subject to any negative associations with the NatWest name)

This is no longer trading, but shows that banks are now trying to step into the fintech loan industry and that we may see more of the traditional banks under new names on aggregator sites in future.

Question 16

Which type of businesses say that they often feel left behind by traditional banks and therefore are more likely to use intermediaries and aggregators to find lender who don’t write it them off so easily due to perception issues?

Answer 16

SMEs