Open Source Weblog

Could your next mortgage be from Microsoft or BT?
April 30, 2008

What with the credit crunch looking like it may turn into a full-blown recession, it occurs to me that it would be a good time for Microsoft, IBM, or even Novell to get into the finance business.

OK, so Microsoft already is in some respects (any company with over $14bn in short term investments needs to have some idea about finance) but it's really an IT company. Why would it want to offer loans, or mortgages, or other financial products?

Well you might ask. You may also ask why BT is already offering its own credit card in the UK, to both BT and non BT customers.

With many of the banks finding it harder and harder to borrow the money to offer attractive interest rates to loan, mortgage and credit card customers, companies (like BT, Microsoft, IBM et al) have an opportunity to step in and do some lending of their own.

Not only do they have huge cash reserves (Microsoft has over $11bn in cash in hand) but the cash-generative nature of their businesses, and the fact that they are household names, gives them considerable credibility in the eyes of consumers.

With the kind of trouble that Northern Rock faced in the UK recently showing that even long-established banks could find themselves in trouble in these challenging times, there are plenty of customers who would feel safer taking out a mortgage with Microsoft than certain banking institutions....

...Better still, Microsoft even has a range of technologies (like Windows CardSpace) that it could presumably put into action to underpin financial products and services of its own. In fact it would become one of its own larger customers as it consumed vast amounts of processing power to support its own financial platform.

Any reason why this won't happen? Maybe.

Microsoft's shareholders may be none too pleased to see it make such a move: they invested in a high tech company, not a bank. Focus: Microsoft is focused on IT challenges, not banking.

Risk: Microsoft isn't in danger of running short of cash, but a percentage of loans always default, so it may consider it safer to invest its cash in other ways. Brand and customer satisfaction: nobody likes the company that charges them a huge fee for exceeding their credit limit, or missing a minimum payment. Then again, nobody likes a blue screen of death, either.

But on balance, I'm still not sure the idea hasn't crossed Bill and Steve's minds.

Posted by Jason Stamper on April 30, 2008 05:20 PM

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