Factoring Services Market Size, Share & Trends Analysis Report By Category (Domestic, International), By Type (Recourse, Non-recourse), By Financial Institution, By End-use, By Region, And Segment Forecasts, 2021 - 2028

Report Overview

The global factoring services market size was valued at USD 3,235.88 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 8.4% from 2021 to 2028. The current growth of the market can be attributed to the increase in open account trade; the rapid expansion of businesses in Asia, mainly led by China; the increase in cross-border factoring; and the rapid development of factoring services in the European region. Moreover, the increasing need for an alternative source of financing for Small and Medium Enterprises (SMEs) has also been driving the growth of the market. The COVID-19 pandemic has affected the global economy by leading to supply chain and market disruptions and inducing a severe financial impact on enterprises and financial markets. COVID-19 related travel bans, emergency declarations in more than 40 countries, stock market volatility, and the panic among the global population have also affected several industries, reducing business confidence, and leading to uncertainty about the future. These developments are likely to slow down the growth of the factoring services market in the short term.

Significant growth in the Banking, Financial Services, and Insurance (BFSI) industry is considered a key factor in developing a positive impact on the market growth. Moreover, the growing requirement for alternative sources of financing for Micro, Small, and Medium Enterprises (MSME) is driving the market growth. Factoring services enable businesses to obtain working capital loans and mitigate credit risks. Additionally, developments associated with cryptocurrency and blockchain technology in factoring services could also drive the demand for factoring services worldwide. Advanced solutions help businesses automate invoices with unique identification to complete transactional security, fast funding, and smart contract facilities, among other benefits.

Organizations such as Factors Chain International (FCI), the global representative body for financing and factoring of open account trade receivables, provide an exclusive system for cooperation in cross-border factoring. Currently, FCI has members from around 75 countries and serves more than 80% of the world’s international factoring volume. Other organizations such as World Bank, European Bank for Reconstruction and Development (EBRD), AfreximBank, IDB Invest for the Americas, Asia Development Bank (ADB), the ICC Banking Commission, and several other national factoring associations are instrumental in promoting financing services across the world.

Financial support has become a prerequisite in emerging economies and it can be addressed by improving the factoring process. Banks are collaborating with technology companies to come up with novel solutions and reduce the overall cost of the process. Furthermore, several fintech businesses are investing in finance models such as budget and forecasting models to make factoring easy, digital, and transparent. For instance, BillFront, a technology-enabled finance provider, primarily serves digital media companies. The factoring services offered by BillFront help media companies maintain the cash flow, which would otherwise take two to three months for payments from their customers.

Category Insights

The domestic segment led the factoring services market, accounting for a revenue share of around 70% in 2020. The high domestic demand in countries such as China, owing to the government’s efforts to fuel private consumption, is the prime factor driving the growth of the segment. Easy risk coverage provided by banks and low fees and costs compared to international offerings are also accelerating the growth. Assuming the buyer's credit risk and ability to make payments, business operations of domestic factoring are easy to carry out and the seller can obtain funding and other factoring services by providing the necessary documents and invoices.

The international segment has witnessed substantial growth owing to the rise in open account trade, especially from suppliers in emerging countries. The major importers in developed countries are considering factoring as a suitable alternative to conventional forms of trade finance, which is further driving the demand for the services. Furthermore, international factoring services are increasing owing to growing international trade and awareness among export-import businesses. Moreover, the move of an increasing number of Chinese manufacturers to shift production facilities to countries such as Vietnam, Mexico, and the Philippines to avoid the ongoing tariff wars is also expected to boost the growth of the international segment.

Type Insights

The recourse segment accounted for the largest market share of around 55% in 2020. Recourse factoring provides all facilities except debt protection. The client’s liability to the factor is not discharged until the customer clears the dues. Recourse factoring is extensively used in developed countries and more organized markets.

In non-recourse factoring, the financing company is responsible for the risks of unpaid invoices, which offers protection against bad debts. The non-recourse segment is likely to witness substantial growth over the forecast period owing to the widespread adoption of non-recourse factoring in developing countries. SMEs are likely to be the leading adopters of this financing facility as interest rates for both recourse and non-recourse factoring are almost equal across the world. Moreover, the demand for non-recourse financing is expected to increase as short-term financing offers debt security, employment, and growth opportunities in developing nations.

Financial Institution Insights

The banks segment held the largest market share of around 80% in 2020. Banks are the major financing organizations across the world and are increasingly offering factoring services owing to the adoption of technologies such as distributed ledgers. Several banks worldwide are developing blockchain technology platforms for meeting the financial needs of their clients.

For instance, Etradeconnect, sponsored by the Hong Kong Monetary Authority, offers a trade finance platform based on Distributed Ledger Technology (DLT) in Hong Kong. Similarly, the China Trade and Finance Interbank Trading Blockchain Platform has been backed by the China Banking Association to deploy the technology. These developments in China, a key nation offering financing services, are likely to boost the growth of the banks segment.

End-use Insights

In terms of market revenue, the manufacturing segment accounted for the largest market share of over 30% in 2020. The expansion of the manufacturing sector in countries such as India and other South and Southeast Asian countries is the prime driver of factoring services in the manufacturing segment. Several countries in the region are shifting from agrarian to manufacturing and export-oriented economies, exporting largely to Europe, the U.S., and North Asia. Moreover, the demand for factor financing is expected to continue to increase as Asian countries are emerging as hubs for companies focusing on low-cost manufacturing.

The others segment, covering industries such as transport and logistics, and healthcare, is likely to witness substantial growth over the forecast period. Medical factoring is helping companies overcome cash flow problems caused due to delayed payments. The services are primarily used by medical professionals and healthcare providers. The increasing demand for healthcare facilities and medical professionals in the wake of the COVID-19 pandemic is further driving the demand for factoring services in the healthcare segment.

Regional Insights

Europe accounted for the major revenue share of around 60% in 2020. France, Italy, Germany, and the U.K. together accounted for more than two-thirds of the regional market. The growth can be attributed to the strategic importance of receivables funded by the commercial banking sector. The existing trade within the European Economic Zone and growing trade with fast-growing markets in Eastern Bloc countries are also propelling the demand for factoring services in the region.

However, prospects for the market are rising in regions such as Asia Pacific and Latin America owing to the promising development rate of the regional economies and significant growth of trade operations. Asia Pacific has more than 5,000 companies offering factoring services, followed by North America. Moreover, Asia Pacific is home to a large number of emerging economies such as China, India, Malaysia, Indonesia, the Philippines, and Thailand. These countries are receiving investments from developed markets that are saturated and are looking for new opportunities in the region.

Key Companies & Market Share Insights

The key players operating in the factoring services market include China Construction Bank Corporation; Eurobank; Hitachi Capital (UK) PLC; Deutsche Factoring Bank; HSBC Group; ICBC China; and Triumph Business Capital. Market players are investing aggressively in research and development activities, improving their internal processes, actively engaging in new product development, and improving their existing products to acquire new customers and increase their respective market shares. Companies are also focusing on mergers & acquisitions and strategic partnerships to develop technologically advanced products and gain a competitive edge in the market.

For instance, in December 2019, China Construction Bank (CCB) launched the blockchain-based refactoring platform, BCTrade. The platform was aimed to help commercial factoring businesses reduce risks associated with refactoring. BC Trade, a blockchain-based platform, in partnership with CCB Financial Technology, offered new features in factoring, improvements in efficiency, and cross-chain connectivity.

Market players are also investing aggressively in research and development activities to drive organic growth. For instance, in July 2018, BNP Paribas launched Mediana, the new e-factoring platform. The platform helped create and provide a better digital client experience in handling portfolios safely. Some of the prominent players operating in the global factoring services market are:

• Barclays Bank PLC

• BNP Paribas

• China Construction Bank Corporation

• Deutsche Factoring Bank

• Eurobank

• Hitachi Capital (UK) PLC

• HSBC Group

• ICBC China

• Kuke Finance

• Mizuho Financial Group, Inc.

Factoring Services Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2018 to 2028. For this study, Grand View Research has segmented the global factoring services market report based on category, type, financial institution, end-use, and region:

• Category Outlook (Revenue, USD Billion, 2018 - 2028)

  • Domestic

  • International

• Type Outlook (Revenue, USD Billion, 2018 - 2028)

  • Recourse

  • Non-recourse

• Financial Institution Outlook (Revenue, USD Billion, 2018 - 2028)

  • Banks

  • Non-Banking Financial Institutions

• End-use Outlook (Revenue, USD Billion, 2018 - 2028)

  • Manufacturing

  • Transport & Logistics

  • Information Technology

  • Healthcare

  • Construction

  • Others

• Regional Outlook (Revenue, USD Billion, 2018 - 2028)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

    • Italy

  • Asia Pacific

    • China

    • Japan

    • India

    • Singapore

  • Latin America

    • Brazil

    • Mexico

    • Chile

  • MEA