The Neo-Intermediation

Developments in information technology and increased competition both within and outside the industry have led to the unbundling and desegregation of brokerage functions. Nimble on-line institutions like E * Trade and Microsoft Investor are usurping the roles traditionally played by full-service and discount brokerages, forcing some powerful firms to narrow their focus and others to broaden their product offerings. These changes raise the question: will full-service and discount brokerages continue to exist as we know them in the twenty-first century? To answer this question, the authors provide a new market transformation framework called Neo-Intermediation that helps explain how leading on-line firms are desegregating and reagregating functionality in order to create value in innovative ways. The pattern of change for brokerages is: Unbundling of traditional services - market players examine the elements of the buyer and seller relationship; Reallocation of authorities as the “customer” determines what they will do and what they will pay for in the market; Creation of strategic alliances with complementors - sites/products whose products complement yours. This means that if a customer has their product, they would also want yours; and Repackaging and emergence of both commodity and differentiated service providers that serve the needs of the “new” customer. The authors believe that these patterns are evident in all forms of financial services and form the basis of market interventions in most service industries. This paper addresses the transformation of the brokerage services marketplace. With new patterns of intermediation emerging, the winners of the future will be those who most successfully create new context bundles that meet customers’ needs.