Financial Service Middlemen

The middlemen generally in the financial services sector could be the Direct Sales Agent
(DSA) responsible for making the sales calls, enlisting new customers for a bank maybe
to buy a credit card. The other middlemen could be the Third Party Administrator (TPA)
involved in settling a medical insurance claim. In the case of airlines it is the travel agent
for booking airline tickets and getting a commission from the airlines.
Service
Industry

Type of
Middlemen

No. of people
& functions
performed
35000
*generate leads
* convert into
sales for a
commission
from the bank

Banks

Direct Sales
Agents (DSA)

General
Insurance

Third Party
5000
Administrators *settle a
(TPAs)
medical
insurance claim

Airlines

Travel Agents

150,000
Airline ticket
booking and
delivery

Reasons for possible

deintermediation
*Controlling costs and
quality
*move towards
insourcing (as volumes
achieved)
* cross selling to current
customers
*impact of technology
*delays in claim
settlement
*inconsistent data
capturing
*Accurate claims data
essential for pricing, and
has to be confidentialTPAsservice multiple
companies
* with volumes built
companies shifting
towars internalizing
claims management
*need to cut costs due to
increase in fuel prices,
skewed pricing
*cut in commission paid
to agents
*online ticketing

(Possible scenario)
Future of
middlemen
* will continue to
bring new
customers
May join the
banking workforce
*no real entry
barriers, need to
improve their skill
sets to survive
TPAs need to invest
in infrastructure and
skills

*need to offer value

added services

Source: Adapted from Sharma Arti, the Vanishing Middlemen Outlook, August 11,
2008, pp 24-26