Photo of Natasha Condon, Citi, Anita Mehra and Rahul Daswani, Microsoft.
Microsoft has created ‘Payment Solutions as a Strategic Business Partner’. This flexible solution incorporates many facets but is already making great headway with customers.
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Structured Finance Manager
Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realise their full potential.
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How Microsoft’s flexible payment solutions extend terms to a diverse customer base
Microsoft wants to manage its own working capital and risk management tightly while supporting sales goals. Microsoft’s terms are typically 30-60 days for sales of software. However, end customers quite often require extended payment terms. This disparity leads to working capital challenges in the supply chain. Microsoft’s primary objective was to offer its customers an innovative solution based on extended payment terms that would allow them to meet their own company objectives and consequently strengthen the relationship Microsoft has with its customers.
This was not achievable using a single yardstick for all customers as they range from emerging market players to those in the most developed markets, across public sector, leading corporates, partners/re-sellers and financial institutions.
Microsoft needed an external banking partner who could provide a global offering with local market expertise. It needed to offer extensive trade finance experience with strong structuring ability to customise solutions for Microsoft’s bilateral arrangements with each of its customers who were from different geographies, industries and sizes.
Microsoft decided to combine a novel trade finance solution with the sales offering for the resellers. This avoided adding to the financing and sales team’s administrative burden, freeing up more of their time for strategic business tasks.
The solution uses a variety of instruments including accepted invoices, bills of exchange and letters of credit, supporting resellers and end-customers. Its roll-out has resulted in volumes of approximately US$100m since May 2017. The adaptability has already prompted an extension to cloud products, which have a different payment schedule.
The solution was introduced in Israel, Oman and the United Arab Emirates (UAE) and is now being considered for Saudi Arabia, Sub-Saharan Africa and Europe.