U.K.-based financial technology (fintech) firm Finastra announced on April 12 that it is partnering with Microsoft (NASDAQ:MSFT) to provide additional financing options for small and medium-sized enterprises (SMEs) using the Microsoft Dynamics 365 platform. The partnership is good for MSFT stock because it strengthens the company’s offerings for SMEs.
If you own Microsoft shares, the expanded partnership is an indication Microsoft is taking the SME marketplace very seriously. The two companies first collaborated in July 2020 as part of their joint efforts to accelerate the digital transformation of financial services.
Anyone who operates in the SME space knows that financing, or lack thereof, is a critical factor in that business’s success or failure. So the latest move by Microsoft and Finastra bodes well for both companies.
If you’re not familiar with the term embedded finance — Finastra’s specialty — you have probably used embedded finance tools within many of the apps you have on your smartphone. “Buy now, pay later” and digital wallets are just two examples of embedded finance.
Oracle estimates the embedded finance market will grow to $7 trillion over the next decade. So, in the case of Microsoft Dynamics 365 SME users, embedded lending options will be available within the platform, allowing them to apply for loans without having to exit the platform.
“By embedding secure access to key financial services in the context of Microsoft Dynamics 365, our SME customers will have a faster path to the financing options and critical capital they need to thrive,” Bill Borden, Microsoft’s Corporate Vice President of Financial Services, stated in the press release.
Microsoft is a $2 trillion company. It has to be able to provide its SME customers with an experience that’s value-added and helps this customer demographic grow. If it’s not doing things like delivering embedded finance within Dynamics 365, it’s losing the battle for its customers.
This latest partnership illustrates how a tech company that sells software subscriptions can help clients do better in ways they could never have imagined a decade ago. Embedded finance and Banking as a Service (BaaS) are just two examples.
Expanding its relationship with Finastra strengthens its SME offering and MSFT stock.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
