The global factoring services market size was USD 3566 Billion in 2022 and is likely to reach USD 7873.81 Billion by 2031, expanding at a CAGR of 9.2% during 2023–2031. The growth of the market is attributed to the quick extension of businesses across globe and growing need for an alternative source of financing for small & medium enterprises (SMEs).
Factoring is a form of financial service provided by banks or third-party financial service providers in which a seller sells their accounts receivables to the factor at a discounted rate to raise funds. The seller receives quick payment for the receivable, while the factor retains ownership of the invoice and earns a little profit.
Furthermore, there are three parties involved in factoring such as, the seller, the buyer, and the factor. The seller sells the items to the buyer, generates invoices, and submits them to the factor for funding, while the factor checks the invoices. Then, the factor pays the seller 80% of the funds and remaining 20% after the buyer pays the factor.
The interest charged by the factor is paid at the same time or in arrears depending on the type of arrangement. The volume of financing and the credit quality of invoices are used to determine the cost of factoring.
Moreover, fin- tech companies are providing factoring services to freelancers and SMEs to help them dealing with the financial stress of late payments. Due to the simplicity and financial flexibility, factoring services are likely to become an important feature of supply chain networks.
The COVID-19 outbreak has impacted the global economy in various ways such as, disturbing production and demand, creating supply chain and market disruption, and influencing financial institutions and markets. Furthermore, it has brought significant effects on the factoring service market along with several aspects such as, restricting travel, limiting all indoor events, stock market volatility, decreasing business confidence, growing panic among the population, and uncertainty about future.
Factoring Services Market Trends, Drivers, Restraints, and Opportunities
Growing awareness related to the benefits of supply chain financing along with the effectiveness of the factoring receivables technique is propelling the market growth in the coming years.
Rising utilization of digital platforms in trade financing and increasing cross-border trade activities are estimated to fuel the market expansion during the forecast period.
Ongoing development linked with cryptocurrency and blockchain technology in factoring services is estimated to upsurge the market growth.
Perceptions of excessive interest rates and lengthy documentation processes in factoring services are key factors hindering the market expansion.
Financial institutions and banks are persistently trying to upgrade the expertise on the technological and operational levels for providing cost-effective services to the customers. Thus, these factors are anticipated to offer enormous opportunity for market in the coming years.
Scope of Factoring Services Market Report
The report on the global factoring services market includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.
Factoring Services Market - Global Industry Analysis, Growth, Share, Size, Trends, and Forecast
Types (Non- resources and Resources), Financial Institutions (Non- banking Financial Institution and Banks), Categories (International and Domestic), and End- users (Construction, Manufacturing, Healthcare, Transport & Logistics, Information Technology, and Others)
Asia Pacific, North America, Latin America, Europe, and Middle East & Africa
Company Share, Market Analysis and Size, Competitive Landscape, Growth Factors, and Trends, and Revenue Forecast
Key Players Covered in the Report
BNP Paribas; Barclays Bank PLC; Mizuho Financial Group, Inc.; China Construction Bank Corp.; Factoring Bank; Deutsche Eurobank; HSBC Group; Hitachi Capital (UK) PLC; Kuke Finance; and ICBC China.
Factoring Services Market Segment Insights
The resources segment is expected to grow at a rapid pace
Based on types, the global factoring services market is bifurcated into non- resources and resources. The resources segment is expected to grow at a rapid pace during the forecast period.
Furthermore, all services, except debt protection, are provided via recourse factoring. The client's obligation to the factor does not end until the dues are paid in full. Additionally, in industrialized regions and more organized markets, recourse factoring is widely utilized.
However, the non- recourse category is expected to expand substantially in the coming years due to the increasing popularity among SMEs throughout the world. Furthermore, it provides various benefits such as, financing company's full credit coverage. In addition, short- term financing offers debt stability, employment, and economic possibilities in developing countries. Thus, aforementioned factors are propelling the segment growth.
The banks segment is projected to expand at a considerable CAGR
On the basis of financial institutions, the market is divided into non- banking financial institution and banks. The banks segment is projected to expand at a considerable CAGR during the forecast period, owing to the rapidly growing adoption of technology such as distributed ledgers. Furthermore, several banks are implementing blockchain technology platforms in order to meet the financial needs of the customers.
Moreover, in Hong Kong, Etradeconnect, a trade finance platform based on Distributed Ledger Technology (DLT), is funded by the Hong Kong Monetary Authority. Similarly, the China Banking Association has recently sponsored the China Trade and Finance Interbank Trading Blockchain Platform in its efforts to implement the technology. Thus, all these factors are anticipated to upsurge the segment growth in the coming years.
The domestic segment is estimated to gain a large revenue share
Based on, categories, the global factoring services market is bifurcated into international and domestic. The domestic segment is estimated to gain a large revenue share during the forecast period due to the increasing government’s support to boost private consumption of factoring services.
Furthermore, bank’s easy risk coverage along with inexpensive fees related to overseas offers, are fueling expansion. Domestic factoring business operations are simple to carry out assuming the buyer's credit risk and ability to pay, and the seller can acquire funding along with other factoring services by submitting the relevant documents and invoices.
However, the international segment is anticipated to register a significant growth in the coming years, owing to the increasing open account trading, particularly from emerging market suppliers. Furthermore, factoring is being considered by big importers in industrialized countries as a viable alternative to traditional forms of trade finance. Thus, aforementioned factors are fueling the segment growth.
The manufacturing segment is projected to expand at a substantial rate
On the basis of end- users, the market is segregated as construction, manufacturing, healthcare, transport & logistics, information technology, and others. The manufacturing segment is projected to expand at a substantial rate during the forecast period due to the growing expansion of the manufacturing sector all around the world.
Moreover, several economies in the region are transitioning from agrarian to manufacturing and export economies, as the majority of the exports going to Europe, the United States, and North Asia. Furthermore, as Asian countries emerge as hubs for enterprises focusing on low-cost manufacturing, demand for factor financing is projected to increase.
Europe is anticipated to constitute a key market share
In terms of regions, the market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. Europe is anticipated to constitute a key market share during the forecast period, owing to the favorable government laws and the presence of key players such as, the Eurobank Group, Deutsche Factoring Bank, HSBC Holdings, and others in the region.
Moreover, factoring is currently regarded as a solid short-term finance solution dedicated to the development of the European economy and job creation. Furthermore, increasing strategic significance of account receivables financed by the commercial banking sector along with the existing trade within the European Economic Zone (EEZ) is boosting the market in the region.
However, the market Asia Pacific is estimated to expand substantially in the coming years due to the promising development rate of regional economies and increasing trade operations. Furthermore, factoring services are offered by more than 5,000 organizations in Asia Pacific, followed by North America. A considerable number of growing economies, such as China, India, Malaysia, Indonesia, the Philippines, and Thailand, are attracting investments from established markets that are looking for fresh prospects in the region.
The global factoring services market has been segmented on the basis of
- Non- banking Financial Institution
- Transport & Logistics
- Information Technology
- Asia Pacific
- North America
- Latin America
- Middle East & Africa
- BNP Paribas
- Barclays Bank PLC
- Mizuho Financial Group, Inc.
- China Construction Bank Corp.
- Factoring Bank
- Deutsche Eurobank
- HSBC Group
- Hitachi Capital (UK) PLC
- Kuke Finance
- ICBC China
Some of the major players competing in the global factoring services market are BNP Paribas; Barclays Bank PLC; Mizuho Financial Group, Inc.; China Construction Bank Corp.; Factoring Bank; Deutsche Eurobank; HSBC Group; Hitachi Capital (UK) PLC; Kuke Finance; and ICBC China.
To recruit new clients and grow the respective market shares, market players are aggressively spending in upgrading internal processes, R & D activities, and improving existing products. In addition, companies are also focusing on mergers & acquisitions, and strategic partnerships to develop technologically advanced products in order to acquire a competitive edge in the market.
For example, China Construction Bank (CCB) has introduced BCTrade, a blockchain-based refactoring platform, in December 2019. The platform has been created to assist commercial factoring companies in reducing the risks of restructuring. In collaboration with CCB Financial Technology, BC Trade, a blockchain-based platform, which offers additional factoring features, cross-chain connectivity and efficiency enhancements.
For instance, Trump Business Capital, a division of Triumph Bancorp Inc., released the Cash4Truckers mobile app for business operations in 2017. The software allows business carriers to quickly submit invoices and start the payment process. The smartphone application includes picture recognition technology to verify that payments are made to the correct person. Furthermore, it has the adaptive technology for quick identification of the transportation load papers required for filing invoice.