Photo of Cynthia Koh, Citi and Hooi San Tan, Intel Corporation.
The solution implemented here is about how Intel re-engineered it’s early payment discount programme to make this more attractive to their suppliers. A workshop at Intel’s banking partners’ Innovation Lab in Singapore uncovered a solution which we should be watching.
Hooi San Tan
Treasury Director
Antoine Hamelin
Treasury Director
Intel Corporation is an American multinational technology company headquartered in Santa Clara, California.
in partnership with
The challenge
Intel operated its own early payment programme but the take-up rate was low. The high discount rates, the basic user interface and the lack of communication around the programme contributed to the low take-up rate.
Intel was sitting on large pools of liquidity earning low interest yield due to the interest rate environment. Intel wanted to implement a more flexible and attractive early payment solution that suppliers wanted to participate in and generate higher returns on Intel’s excess cash without taking additional risks.
The solution
The optimal solution was to re-engineer the early payment discount programme to make it more attractive to its suppliers. Intel Treasury, Accounts Payable team and Global Supply Management team, performed cost-benefit analysis and were then able to secure management approval to pursue the Dynamic Discount Programme. Intel ran a thorough request-for-proposal (RFP) to evaluate different early payment platforms and awarded the mandate to Citi’s partner C2FO.
The new dynamic discount platform was launched within a few months. The solution provides full-service to both Intel and its suppliers to maximise Intel’s early payment programme. C2FO manages and optimises Intel’s daily returns on excess capital within prescribed criteria provided by Intel.
Suppliers bid for the approved invoices at pricing levels that they are comfortable to provide. Intel sets their minimum return hurdle and cash available for the programme.
Best practice and innovation
The launch of a global early payment programme through an innovative digital marketplace has enabled Intel to provide liquidity support to their supply chain whilst driving significant returns on excess capital without any credit risk. The programme was rolled out by Intel within a few months. It was easy to connect technically, and the supplier on-boarding was fast and efficient.
The real significance of Intel’s early payment programme is in the results. Intel approved suppliers bid for invoices at discount rates which were approved for payment early by Intel and still generated an average return several multiples higher than the heritage in-house programme during the first pilot launch. With this programme, Intel provides an alternative funding source to its suppliers, enabling them to set their own acceptable early payment rates.
Key benefits
- Easy to use solution. Low maintenance for the buyer.
- Alternative funding source for suppliers.
- Improved return on excess cash without credit risk.
