What is financial intermediation?

Financial intermediation refers to the process by which financial institutions such as banks, credit unions, and investment firms facilitate the flow of funds between savers and borrowers. These institutions act as intermediaries by accepting deposits from savers and then lending those funds to borrowers in the form of loans or investments. This process helps to allocate capital efficiently in the economy and allows individuals and businesses to access the funds they need to invest, grow, and achieve their financial goals. Financial intermediation also involves providing other financial services such as payment processing, risk management, and investment advice.