How they do it: When a merchant accepts a payment via PayPal (e.g. for his E-Commerce shop), the funds are first collected from the customer’s PayPal balance or credit card. Only after PayPal asserted that the payment is genuine and it received the funds from the customer, the payment is ”deposited” virtually in the merchant’s account. Subsequently, the merchant may then transfer the funds to his regular bank account. Both merchant and customer balances lead to PayPal holding an immense amount of funds ”virtually” on his platform, before the funds are at a later stage liquidated or transferred away from the platform.
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How they do it: In the Amazon web store, customers usually pay in the check-out process prior to the products being shipped (payment upon receivement possible for a fee). This gives Amazon an increased liquidity which e.g. enables growth investments.
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How they do it: Amazon Web Services offers pricing for it’s computing pricing on an annual, pre-paid schedule. These so-called ”Reserved Instances” provide customers with a significant discount (up to 75%) compared to On-Demand instance pricing.
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How they do it: Computer manufacturer Dell was one of the pioneers in employing a build-to-order strategy in the 1980s. Computers were first customized and paid for by the customers, with invoices for the computer parts from the suppliers having lenghier payment deadlines. This allowed it to achieve a highly negative cash conversion cycle. In its early years the Cash Machine pattern presented an important means for Dell to finance its growth. At its founding in 1984, Michael Dell’s seed capital consisted of a mere US $1,000.
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