Latin America Reverse Factoring Market Size, Share, & Trends Analysis Report By Category, By Financial Institution, By End-use, By Region, And Segment Forecasts, 2023 - 2030

Report Overview

The Latin America reverse factoring market size was valued at USD 17.76 billion in 2022 and is anticipated to expand at a compound annual growth rate (CAGR) of 18.0% from 2023 to 2030. The market growth can be attributed to the shifting focus of micro, small, and medium-sized enterprises (MSMEs) toward supply chain financing and the rising adoption of new technologies in the market. The stringent lockdown measures during the COVID-19 pandemic disrupted the whole supply chain process in Latin America resulting in a massive slowdown in the manufacturing industry, reduced import export operations, and affected the financial performance of industries. However, with the ease in lockdowns in early 2021, most of the MSMEs preferred reverse factoring services to optimize their supply chain and increase their working capital to accelerate their business growth, thereby driving the market growth during the forecast period.

Supply Chain Financing (SCF) or reverse factoring is emerging as a prominent alternative for accessing short-term credits in Latin America. Supply Chain Management (SCM) helps suppliers monetize their bill receivables without any financial liability, which is inevitable in the case of a loan. By monetizing suppliers’ receivables and offering immediate liquidity, reverse factoring also reduces the Cash Conversion Cycle (CCC) and Days of Sales Outstanding (DSO). In addition, SCF enables the buyer to initiate faster payments to the supplier, which helps improve corporate liaisons with suppliers and significantly reduces the operational risk throughout the supply chain. Thus, the following factors aimed to drive the market during the forecast period.

The rising support by governments across the region for creating smooth working capital solutions is driving Latin America reverse factoring market growth. The governments of various countries in the region, including Paraguay, Chile, Mexico, and Argentina, are announcing supportive initiatives for the promotion and development of reverse factoring. For instance, in 2018, the Government of Peru mandated e-invoice issuing for all companies from all end-use sectors. E-invoicing is assisting Peru-based MSMEs in obtaining instant cash payments from buyers through reverse factoring. Thus  

Advancements in digital technologies such as big data analytics, Artificial Intelligence (AI), Natural Language Processing (NLP), Machine Learning (ML), Blockchain, the Internet of Things (IoT), and cloud computing are creating new opportunities for the market. Further the AI solution providers are investing significant time and efforts in R&D activities to offer improved AI tools for reverse factoring solutions. For instance, in September 2022, FactorFox Software launched FactorFox Mobile Optical Character Recognition (OCR), an AI application, for various factoring services. This OCR application optimizes an organization's ability to automate documentation and speed up operations for faster funding.

Market players are focusing on mergers, partnerships, and acquisitions to enhance their service offerings and brand value, creating a favorable environment for the reverse factoring services market. For instance, in May 2022, Galgo Capital’s subsidiary, Ancon SpA, a special purpose vehicle company, acquired a 40% stake in the factoring and account collection company Crece Capital for an undisclosed amount in Peru. Moreover, in March 2021, eFactor Network, a fintech company, renewed its partnership with PrimeRevenue, Inc., a working capital solution provider, for four years. Owing to the partnership, eFactor Network would be able to provide PrimeRevenue, Inc’s sustainable financial technology solutions to its clients across Latin America to improve their cash flows. Thus, the following factor is propelling the growth of the market.

Category Insights

The domestic segment accounted for the largest market share of 92.2% in 2022, the developing economies are building comprehensive domestic supply chains for reducing their reliance on imported goods, thereby reducing cross-border trade flows. For instance, in December 2022, eFactor Network, a Mexican fintech company, and Trafigura Pte Ltd, a Singapore-based commodity trading company, collaborated with several financial institutions and piloted a sustainable supply chain finance initiative for mining companies in Mexico. The program was aimed at strengthening mining companies’ working capital requirements and scaling out responsible sourcing options throughout the value chain. Therefore, strengthening the demand for reverse factoring in the segment during the forecast period.

The international segment is anticipated to expand at a CAGR of 21.5% during the forecast period. Some of the major benefits of international reverse factoring include trading with countries outside of the bank's jurisdiction; suppliers can receive supplementary cash flow, allowing them to ensure steady supply and increase their volume of production; and suppliers can benefit from fast funding and high advance rates. Thus, the following benefits will supplement the growth of the segment during the forecast period.

Financial Institution Insights

The banks segment accounted for the market share of 78.5% in 2022. The segment growth can be attributed to the growth in digitization to bridge the current gaps in financial services and the need in the banking sector to provide improved customer experience. Furthermore, the growing adoption of mobile-based payment channels and cross-border transactions is anticipated to propel the segment growth over the forecast period.

The non-banking financial institutions segment is anticipated to grow at a CAGR of 19.2% during the forecast period. NBFIs such as JPMorgan Chase and Wells Fargo use advanced technologies and leverage their partnership ecosystems across the credit/loan disbursement, and customer onboarding with the help of Artificial Intelligence (AI), machine learning, and blockchain. The trade & working capital solutions offered by these organizations help businesses in dealing with an ever-changing geo-political and supply chain environment. The companies offer trade expertise with the help of digital solutions to their global clients. These offerings accelerate cash flow and optimize working capital in a business, improve operational efficiency, and streamline cross-border payments. Thus, the following factors help in driving the segment growth during the forecast period.

End-use Insights

The manufacturing segment accounted for the largest market share of 31.1% in 2022. Supply chain finance enhances cash flow by broadening the payment terms of the manufacturer’s supplier and providing suppliers with the option of receiving early payment for invoices. Supply chain finance, when combined with the right program partner, provides a multi-funder approach that enables companies to offer supply chain finance to a greater number of suppliers in different currencies and geographies. This helps extend the benefits of early payment to more suppliers who need to support their customers' business transformations, which helps meet the buyer or customer’s working capital goals. It also provides manufacturers with visibility into payment processing and invoice status, enabling them to know the payment date. These benefits and capabilities provided by supply chain finance are expected to drive the demand of the segment during the forecast period.

The healthcare segment is expected to attain the highest CAGR of 20.6% manufacturers in the healthcare supply chain work on a variety of initiatives to grow, scale, and invest in themselves and others. They require easy access to readily available cash to scale and grow, through acquisitions or innovations. Supply chain financing has the potential to improve a company's cash position. Better cash flow can lead to a broader product portfolio as the company invests in new technology or acquires other manufacturers with a diverse product offering. The following benefits and capabilities provided by supply chain finance in the following segment are expecting significant growth during the forecast period.

Regional Insights

Brazil held the major share of 31.9% of the market in 2022 owing to the increasing manufacturing facilities in the country owing to significant industrialization is encouraging global players to expand their business operations in Brazil. The client firms are focusing on maintaining consistency in their supply to reduce the product reach time to market by providing early payments to the suppliers, and establishing a long-term partnership with suppliers, creating robust market opportunities. Thus, it is derived that market growth in the region will grow significantly.

Argentina is anticipated to rise as the fastest developing regional market at a CAGR of 26.7% Argentina is home to various startups that offer reverse factoring such as MR Presta SA de CV. The key market player across the region is offering customers with easy access of working capital solutions with competitive lending rates, along with the presence of supply chain factoring service providers have propelled the growth of the reverse factoring market in the country.

Key Companies & Market Share Insights

Market players are observed to invest resources in research & development activities to support growth and enhance their internal business operations. Companies can be seen engaging in mergers & acquisitions and partnerships to further upgrade their products and gain a competitive advantage in the market. They are effectively working on new product development, and enhancement of existing products to acquire new customers and capture more market shares.

For instance, in September 2022, JP Morgan Chase & Co. announced the acquisition of Renovite Technologies, Inc., a provider of cloud-native payments technology. Following the acquisition, Renovite Technologies, Inc. would become part of JP Morgan Payments. The acquisition was aimed at helping J.P. Morgan Payments in building a next-generation merchant acquiring platform.Some of the prominent players in the Latin America reverse factoring market include:

• Credit Suisse Group AG

• eFactor Network

• Drip Capital Inc.

• JP Morgan Chase & Co.

• Monkey

• Banco Bilbao Vizcaya Argentaria

• Kyriba

• Barclays Plc

• Deutsche Factoring Bank

• Accion International

• TRADEWIND GMBH

• HSBC Group

• Societe Generale

• Mitsubishi UFJ Financial Group, Inc.

 Latin America Reverse Factoring Market Report Scope

Latin America Reverse Factoring Market Segmentation

This report forecasts revenue growth at regional and country levels and provides an analysis on the latest industry trends in each of the sub-segments from 2018 to 2030. For this study, Grand View Research has segmented the Latin America reverse factoring market based on category, financial institution, end-use, and country.

• Category Outlook (Revenue, USD Million; 2018 - 2030)

  • Domestic

  • International

• Financial Institution Outlook (Revenue, USD Million; 2018 - 2030)

  • Banks

  • Non-banking Financial Institutions

• End-use Outlook (Revenue, USD Million; 2018 - 2030)

  • Manufacturing

  • Transport & Logistics

  • Information Technology

  • Healthcare

  • Construction

  • Others

• Country Outlook (Revenue, USD Million; 2018 - 2030)

  • Brazil

  • Mexico

  • Chile

  • Peru

  • Argentina

  • Paraguay

  • Uruguay

  • Ecuador

  • Colombia

  • Bolivia

  • Rest of Latin America