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Factoring Market

Factoring Market Size, Share & Trends Analysis Report By Factoring Type (Domestic, International), By Provider Type (Banks, NBFCs), By Enterprise Size (Small and Medium Enterprises (SMEs), Large Enterprises), By End User (Construction, Manufacturing, Healthcare, Transportation & Logistics, Energy & Utilities, IT & Telecom, Others (Staffing Agencies, Advertising)) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Report Code: SRFS1429DR
Study Period 2019-2031 CAGR 5.7%
Historical Period 2019-2021 Forecast Period 2023-2031
Base Year 2022 Base Year Market Size USD 3646.89 Billion
Forecast Year 2031 Forecast Year Market Size USD 5680.17 Billion
Largest Market Asia Pacific Fastest Growing Market Europe
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Market Overview

The global factoring market size was worth USD 3646.89 billion in 2022. It is estimated to reach an expected value of USD 5680.17 billion by 2031, growing at a CAGR of 5.7% during the forecast period (2023–2031). As firms struggle to manage cash flows, especially when consumers delay payments, factoring lets them convert accounts receivable into cash. Maintaining and expanding their activities requires liquidity.

Factoring is a type financial service offered by the banks or the third-party financial service provider in which a seller trades its accounts receivables the factor at a discount rate in order to raise the funds. The seller gets immediate funds for the receivable and the factor holds the invoice and makes a small profit. It consists of three stakeholders namely seller, buyer and factor. The seller sells the goods to the buyer, raise the invoices and submit the invoices to the factor in order to raise funds whereas the factor verifies the invoices. The factor pays the 80% of the fund to the seller and remaining 20% fund after the buyer make payment to the factor whereas the interest charged  pay at the same time or may be in arrears depends on type of agreement. The cost of factoring is measured by the financing volume and the credit quality of invoices. Typically, the commission fees range from 1.15% to 3.5% per month.

This method helps organizations quickly turn unpaid bills into cash, improving liquidity and operational activity. Businesses' awareness of factoring benefits, globalization of commerce, and growing SMEs seeking flexible financing alternatives have driven market expansion. Technology has also simplified factoring, making it more accessible and efficient for organizations of all sizes. Additionally, economic swings, regulatory changes, and industry trends continue to alter the worldwide factoring business. 

Market Dynamics

Rising Adoption Rate of Fintech Solution among SMEs is driving the market growth

Growing awareness pertaining to the advancement of financial technology, such as money transfer and payments, budgeting and financial planning, borrowing, saving and investment, and insurance, drives the adoption of Fintech. For instance, the adoption rate of Fintech globally has seen a continuous upward trend, such as, in 2019, the adoption rate of china and India is 87%, whereas for Australia, Canada, Hong Kong, Singapore, the U.K. and the U.S. is 58%, 50%, 67%, 67%, 71%, and 46%, respectively. Most of the payment service providers entrench confidence among small business owners to take their steps in the market. For instance, International Fintech, a licensed e-money institution and payment service provider, offers Fintech solutions for the small business owner, offering automated solutions for bulk payments and related services in the financial sector. As most of the banks are reluctant to provide many pay checks, an automated solution offered by Fintech solution providers comes into play. Fintech offers bulk payment services at reasonable rates. This allows SMEs to approach fintech companies, increasing the return on investments (RoI) of the factors, such as banks or third party insurers.

The Fintech companies’ offers significant legitimacy and safety solution, which monitors the SMEs transaction process. This engenders a win-win situation for the large banks and SMEs to thrive in the factoring industry. FundBox, a U.S.- based company, offers fintech solutions to SMEs. Fundbox allows SMEs to incorporate their accounting software or business bank account to its Fundbox application. This integration renders Fundbox with precise information regarding the business performance, enabling data-driven decision making concerning continuation or termination of the business relationship with the SMEs. If the data fulfils the parameters of the solution, the funds or the loans are made available for the business process. Thereafter, the company schedules the payment process with the help of the Fundbox application, which can be paid back in due course of time. Such kinds of transactions are carried out in a secure manner, recorded in the company’s history to keep track of payments, fees, and amounts dues or earned. Fintech solution, on the other hand, allows SMEs to operate the business and negotiate at short margins.

Blockchain in Invoice factoring is anticipated to offer lucrative growth opportunities

Advent of information technology has revolutionized the financial sector significantly. Innovative solution in financial sector has automated the transaction process in the factoring industry. Also, adoption of automated solution has not only increased the financial sector but also enhanced the security and planning solution. The implementation of crypto-solution has improved the accurate transactions and secured the critical information of both the parties (i.e Supplier and buyers of factoring process), thus preventing from the financial frauds. According to Unicsoft, one of the solution providers of blockchain has identified the some of the application areas where most of the companies are implementing the blockchain in factoring process. Additionally, the secured and speedy workflow process has one of the crucial aspects for the factory processes. Therefore, the integration of blockchain enhances the financial transaction through centralized and encrypted approach by integrating smart contracts in the factoring industry. Ethereum, NEO, Hyperledger, and R3CORDA are some of the open blockchain platform. Out of these, the Ethereum is most preferred platform. The platform enables the decentralized storing and execution of a smart contract by which the hashing process is conducted locally. The processed data further turn out to be public that helps in improving the network security

Regional Analysis

Europe dominates the global factoring market, with 66% of the total market share. Nowadays, factoring is considered as a secured short-term financing product committed to the development of economy and employment in Europe. Europe’s factoring market growth is primarily attributed to the presence of the key players, including Deutsche Factoring Bank, the Eurobank Group, HSBC Holdings, and many others. Moreover, favourable government laws also contributed to the growth of the market in the European region. In 2019, elections held in Europe and EUF leveraged this opportunity to raise awareness about factoring and to promote its benefits for the country.

Report Scope

Report Metric Details
By Factoring Type
  1. Domestic
  2. International
By Provider Type
  1. Banks
  2. NBFCs
By Enterprise Size
  1. Small and Medium Enterprises (SMEs)
  2. Large Enterprises
By End User
  1. Construction
  2. Manufacturing
  3. Healthcare
  4. Transportation & Logistics
  5. Energy & Utilities
  6. IT & Telecom
  7. Others (Staffing Agencies, Advertising)
Company Profiles Deutsche Factoring Bank JPMorgan Chase & Co. Eurobank Ergasias SA HSBC Holdings Plc BNP Paribas Mizuho Financial Group SBI Global Factors Limited Standard Chartered Bank Santander Bank Comerica Rabobank Sterling National Bank Wells Fargo PNC Financial Services Group Others
Geographies Covered
North America U.S. Canada
Europe U.K. Germany France Spain Italy Russia Nordic Benelux Rest of Europe
APAC China Korea Japan India Australia Taiwan South East Asia Rest of Asia-Pacific
Middle East and Africa UAE Turkey Saudi Arabia South Africa Egypt Nigeria Rest of MEA
LATAM Brazil Mexico Argentina Chile Colombia Rest of LATAM
Report Coverage Revenue Forecast, Competitive Landscape, Growth Factors, Environment & Regulatory Landscape and Trends
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Segmental Analysis

Domestic factoring is anticipated to dominate the market during the forecast period

Domestic factoring holds the major share when compared to international factoring, owing to the lack of geographic reach and legal impediments of international factoring. The domestic demand for factoring is considerably increasing in emerging markets attributed to the burgeoning SMEs in the developing countries. These enterprises play a crucial role in upturning the country’s GDP growth. However, this type of business runs out of financial support, which is a major hindrance for them and due to which many SMEs are shutting down their businesses. Below figure depicts the total turnover of international and domestic factoring. International factoring is also known as cross border or export factoring. Export factoring permits trade to be carried out on open account terms and assists, especially if there are short-term sales of products and where there may be a risk of non-payment. It inhibits the credit and collection troubles in the case of international sales and accelerates cash flows, thereby assisting in credit risk mitigation and provides liquidity in the business. It paves a way to provide easy finance to the exporters. Export factoring helps exporters to upturn the sales volume by offering open account terms to the importers, enabling the importers to place large orders. Moreover, factoring companies also ensure the payment from the importers, and in case if the importer defaults on a payment due to bankruptcy, the exporters hold no responsibility for the default. This provision significantly attracts exporters to international factoring. Exporters are also adopting international factoring considerably as they have realized that it can help them to become more competitive in complex world market conditions.

SMEs to grow at a significant CAGR during the forecast period

Factoring plays a critical role in the financial requirements of small and medium-sized businesses. SMEs operating in unfamiliar sectors often face challenges in accessing affordable finance. This adversely effects on the enterprises located in emerging economies. Therefore, SMEs are extensively adopting the factoring services, further augmenting the market growth. Factoring is intended as a means to ease SMEs’ access to trade finance and promote their inclusion in value chains. It also differs from traditional bank lending, as well as asset-based lending, as it does not generate debt on the firm’s balance sheet, and there are no unsettled loans. This helps SMEs to generate the capital without any burden. Developing an alternative for financials is of vital importance for SMEs that still confront difficulties in accessing bank finance. Some entrepreneurs lack financial knowledge, strategic vision, and the resources to attract alternative finance instruments, and thereby they lack potential investors. Hence, factoring helps them to take the business forward, and this boosts the adoption rate of factoring by SMEs. Moreover, factoring also helps SMEs by connecting it with large enterprises through trade finance and supply chain finance. Hence, the factoring industry has great potential to promote SME internationalization in support of intraregional trade and financial inclusion in the region.

Market Size By Factoring Type

Recent Developments

  • March 2023- BNP Paribas S.A. and Hokodo launched a B2B BNPL platform to provide the best cash management and factoring services to multinational corporates.
  • January 2022- Bluevine Capital Inc. sold its invoice factoring business to the Canadian invoice funding platform FundThrough.
  • October 2021- HSBC UAE and HSBC India announced executing Blockchain technology enabling live financial transactions for trading purposes between Universal Tube & Plastic Industries Ltd. (UAE) and ArcelorMittal Nippon Steel India Limited (AM/NS India).
  • October 2020- SocGen’s Czech unit acquired 24.9% stakes in Roger, a financial technology company that provides digital factoring and operational financing services.

Top Key Players

Deutsche Factoring Bank JPMorgan Chase & Co. Eurobank Ergasias SA HSBC Holdings Plc BNP Paribas Mizuho Financial Group SBI Global Factors Limited Standard Chartered Bank Santander Bank Comerica Rabobank Sterling National Bank Wells Fargo PNC Financial Services Group Others Others

Frequently Asked Questions (FAQs)

What is the estimated growth rate (CAGR) of the Global Market?
Global Market size will grow at approx. CAGR of 5.7% during the forecast period.
Some of the top prominent players in Global Market are, Deutsche Factoring Bank, Eurobank Ergasias SA, HSBC Group, BNP Paribas, Mizuho Financial Group INC., ICICI Bank Limited, Axis Bank, etc.
Asia Pacific has been dominating the Global Market, accounting for the largest share of the market.
The region with the most rapid expansion in the Global Market is Europe.
The global Market report is segmented as follows: By Type, By Application

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