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, 2020 - 2027

Report Overview

The factoring services market was valued at USD 3,114.42 billion in 2019. It is expected to register a compound annual growth rate (CAGR) of 7.5% from 2020 to 2027. The growth can be attributed to the increase in open account trade; the accelerating expansion of businesses in Asia, mainly led by China; the increase in cross-border factoring; and the rapid development of factoring services in Europe. Moreover, the increasing need for an alternative source of financing for Small and Medium Enterprises (SMEs) has also been driving the market growth. Additionally, the developments in and implementation of blockchain technology in the factoring market are likely to help improve the overall supply chain by reducing operational costs for businesses.

The rising demand for factoring services among SMEs worldwide can be attributed to the shortage of working capital and cash flows. Several industries find it difficult to sustain as they receive their payments late and their receivables on the balance sheet continue to pile up. Thus, factoring has been of critical importance for such companies to meet their financial constraints. As per the industry estimates, around 100,000 enterprises across the world are using trade receivables as a means of attaining liquidity. Moreover, a significant amount of excess liquidity in developed countries is likely to be invested in emerging and developing economies on a short-term basis. These factors are expected to boost market growth over the forecast period.

Organizations such as Factors Chain International (FCI), a 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. Moreover, 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 for 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 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 to maintain the cash flow, which would otherwise take 2 to 3 months for the payments from their customers.

Several factors are likely to impede the demand for factoring in emerging markets, including archaic regulations hindering the growth of receivables purchase programs, such as the continued use of stamp duty tax, laws limiting the rights of assignment, and foreign currency restrictions. However, the development of receivables registries to safeguard factors from fraud/scam or factoring rules that can guard the industry against unfair regulations is increasing. However, the increasing focus of regulators on data management and extensive adoption of real-time payment networks are expected to assist in trade finance. The development of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Secured Transactions is also expected to boost the market for accounts receivable financing in the coming years.

COVID-19 Impact Insights

COVID-19 has affected the global economy by resulting in supply chain and market disruption and inducing a severe financial impact on enterprises and financial markets. It has also affected several industries in several other ways, such as travel bans, emergency declarations in more than 40 countries, and stock market volatility, in addition to creating panic among the population, reducing business confidence, leading to uncertainty about the future. These developments are likely to slow down the growth of the market in the short term.

Type Insights

The recourse segment accounted for the largest market share of around 55% in 2019. Recourse factoring provides all facilities except debt protection. The client’s liability to the factor is not discharged until the customers clear the dues. Recourse factoring is extensively used in developed countries and more organized markets.

In the non-recourse segment, the financing company is responsible for the risks of unpaid invoices, which offers protection against bad debts. The 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 front runners in utilizing 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 financial institution segment is further segmented into banks and non-banking financial institutions, wherein the bank segment held the largest market share of over 80% in 2019, as banks are being used as the major financing organizations across the world. The demand for factoring services offered by banks is increasing owing to the adoption of several technologies such as distributed ledger technology. Several banks worldwide are developing blockchain technology platforms for meeting the financial needs of their clients.

For instance, in 2018, in China and Hong Kong, two blockchain trade finance platforms were instrumental in the development and implementation of blockchain technology in finance. Etradeconnect in Hong Kong, sponsored by the Hong Kong Monetary Authority, offers a trade finance platform based on Distributed Ledger Technology (DLT). Similarly, in China, 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 in offering financing services, are likely to boost the growth of the bank segment.

End-use Insights

In terms of market revenue, the manufacturing segment accounted for the largest market share of over 30% in 2019. The expansion of manufacturing industries 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 economy, 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 other segments such as transport and logistics and healthcare are 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 pandemic is further driving the demand for factoring services in the healthcare segment.

Category Insights

The domestic segment accounted for the largest market share of around 75% in 2019. 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 as compared to the international segment is also accelerating the growth of the segment. 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 growth in the international segment has been substantial 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, the growing international trade and awareness among export-import businesses are anticipated to fuel the segment growth. Moreover, the move of Chinese manufacturers to shift their production facilities to countries such as Vietnam, Mexico, and the Philippines to avoid the on-going tariff wars is also expected to boost the growth of the international segment.

Regional Insights

Europe accounted for a major market share of around 60% in 2019. 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 its 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 general development of the regions’ 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 characterized by the presence of 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 market is highly fragmented with more than 4,000 companies and organizations offering factoring services across the world. The regional players are participating in cross-border contracts with local players to establish strategic alliances, facilitate business, and gain a competitive edge against the top vendors in the market. ICBC China, Deutsche Factoring Bank, Eurobank, and BNP Paribas are some of the major market participants. The growing demand for an alternative source of financing among SMEs is expected to offer immense growth opportunities for the market players. However, the lack of a stringent regulatory framework is expected to hinder the growth of the market participants in developing countries. To tap the potential opportunities in the market, the market vendors are focusing more on growth prospects in the fastest-growing segments while retaining their position in slow-growing segments.

In December 2019, China Construction Bank (CCB) launched a blockchain-based refactoring platform, named “BCTrade”, focusing on commercial factoring businesses to aid their operations for reducing risks in the refactoring business. BCTrade, a blockchain-based platform, in partnership with CCB Financial Technology, offered new features in factoring, improvements in efficiency, and cross-chain connectivity. 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 prominent players in the global factoring services market include:

• 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 2016 to 2027. 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, 2016 - 2027)

  • Domestic

  • International

• Type Outlook (Revenue, USD Billion, 2016 - 2027)

  • Recourse

  • Non-recourse

• Financial Institution Outlook (Revenue, USD Billion, 2016 - 2027)

  • Banks

  • Non-Banking Financial Institutions

• End-use Outlook (Revenue, USD Billion, 2016 - 2027)

  • Manufacturing

  • Transport & Logistics

  • Information Technology

  • Healthcare

  • Construction

  • Others

• Regional Outlook (Revenue, USD Billion, 2016 - 2027)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

    • Italy

  • Asia Pacific

    • China

    • India

    • Japan

    • Singapore

  • Latin America

    • Brazil

    • Mexico

    • Chile

  • Middle East & Africa (MEA)