intermediation

The act of coming between; intervention; mediation; interposition. Burke.

Process of transferring funds from an ultimate source to the ultimate user. A Financial Institution such as a bank, intermediates credit when it obtains money from a depositor and relends it to a borrowing customer. The opposite is Disintermediation, the withdrawal of deposit funds when savers expect to earn a higher yield through direct investment such as stocks or bonds. See also Financial Intermediary.

The normal flow of funds into Financial Intermediaries such as S&Ls, which lend out the money. Contrast Disintermediation.