Factoring Market Analysis Europe,APAC,South America,North America,Middle East and Africa - US,China,UK,France,Germany - Size and Forecast 2023-2027

Factoring Services Market Forecast 2023-2027

The Factoring Services Market size is estimated to grow by USD 1,720.41 billion at a CAGR of 7.54% between 2022 and 2027. The growth of the market depends on several factors, including the increasing need for alternative financing sources for MSMEs to improve inventory management and liquidity for efficient working capital management. MSMEs require financing to expand their business, develop new products, and invest in better inventory management systems and production facilities. Financing can be obtained from either internal or external sources. However, due to the limited availability of funds with these firms, they often resort to external sources of financing, such as loans from banks, investments from venture capitalists, factoring, and others. Factoring businesses offer working capital loans that help mitigate credit risks and provide dynamic incentives, such as providing loans without start-up or termination fees.

 What will the Size of the Market be During the Forecast Period?

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In the context of business operations, Factoring refers to a financial transaction and a type of debtor finance where a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount. This process provides the business with immediate cash flow to meet its current needs. The factor then collects the payments from the debtors directly. This service is particularly useful for businesses with large accounts receivable or those experiencing cash flow issues. The market is a significant component of the financial services industry, providing businesses with an alternative source of funding. It is essential for businesses in various sectors, including Manufacturing, Healthcare, and Nursing Homes, among others. The service offers several advantages, such as reducing the financing cycle, improving cash flow, and providing access to working capital. Additionally, it allows businesses to focus on their core competencies while leaving the collections process to the factor. The market is growing, with increasing numbers of businesses recognizing the benefits of this financial tool. Capitals, Services, and Financials are key players in this market, providing a range of factoring solutions to meet the diverse needs of businesses.

Market Dynamics and Customer Landscape

The Gmarket is experiencing a transformation fueled by Machine Learning (ML) and Artificial Intelligence (AI) technologies. Natural Language Processing (NLP) streamlines financial services, especially in Supply Chain Finance (SCF) and accounts receivable processes. Traditional methods like cheques are being replaced by electronic alternatives, enhancing automation and efficiency. Both on-premise and cloud-based models are utilized, with AI-based models gaining traction. In the healthcare sector, digital documentation facilitates smoother transactions, including medical insurance claims and laboratory services. Government and factoring group lobbying influence regulations, while alternative finance instruments attract potential investors, fostering growth in international trade and financial institution insights. Our researchers analyzed the data with 2022 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.

Key Market Driver 

The increasing demand for alternative sources of financing for MSMEs is a major factor in driving the global market. Financing is essential for MSMEs to expand their business operations, manufacture new products, and invest in better inventory management systems and production facilities. Internal or external sources are used for financing. The limited availability of and lack of access to funds among these firms compels them to opt for external sources of financing, which include loans from banks, investments by venture capitalists in their business, factoring, and others.

Factoring businesses offer working capital loans to help mitigate credit risks by creating dynamic incentives, such as providing loans without start-up fees or termination fees. Receivables financing, bill discounting, and factoring can take the place of the prerequisites of working capital financing, thereby catering to the special needs of MSMEs. Local vendors in emerging markets have the best monitoring capabilities and knowledge of MSMEs. This allows the structuring of working capital finance and channeling finance and cash credits that can meet the needs of such enterprises and firms, thereby generating huge economies of scale. Such factors will drive the market growth and trends during the forecast period.

Significant Market Trends

The growth of the market is being propelled by the adoption and advancement of blockchain technology. Blockchain, which is the underlying technology of Bitcoin and other cryptocurrencies, is gaining widespread acceptance as a mainstream payment mode and is driving value growth. Its potential to transform various industries, including factoring and stock markets, is evident from the use of blockchain by the National Association of Securities Dealers Automated Quotations (NASDAQ) in its private share-trading market.

Innovations in the blockchain space are expected to lower the initial set-up cost for vendors and digitize the factoring process, resulting in better technology to record trade transactions and easy access to information for all stakeholders, including factors, buyers, and sellers, on a single platform. This will lead to a reduction in risks and drive the growth of the market during the forecast period.

Major Market Challenge

The lack of a stringent regulatory framework for debt recovery mechanisms in developing countries is a major challenge to market growth. The factoring services market faces challenges due to weak tax and legal and regulatory barriers. In developing countries, weak infrastructure also creates more bottlenecks for the collection of receivables. For instance, collecting payments from government-owned firms can be difficult for factors. In the conventional accounting system, the current portion of long-term debt (CPLTD) is considered a liability. This is because it is the money due only in the current period, as the debt is to be repaid from the conversion of current assets into cash. Therefore, corporates with large, fixed assets and CPLTD have tighter working capital, thereby leading to negative working capital.

Factoring companies have no collateral security. A look at the global market scenario also shows that credit insurance is highly prevalent in businesses, which helps mitigate risks and increase the exposure of the clients. In the absence of recourse financing and the rise in frauds and defaults committed by debtors, the market is expected to become less attractive to new entrants during the forecast period.

Customer Landscape

The market forecasting report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the market growth analysis report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.

Customer Landscape

Who are the Major Market Companies?                                     

Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.

ABS Global Factoring AG - The company provides a range of services, including options for start-ups, export businesses, and restructuring. 

The market research and growth report also includes detailed analyses of the competitive landscape of the market and information about 15 market companies, including:

• American Receivable
• Bluevine Inc.
• CapitalPlus Construction Services
• CG24 Group AG
• Charter Capital Holdings LP
• Deutsche Leasing AG
• eCapital Corp.
• Eurobank Ergasias SA
• Factor Funding Co.
• FirstRand Ltd
• HSBC Holdings Plc
• Mizuho Financial Group Inc.
• New Century Financial Inc.
• PMFBancorp
• Riviera Finance of Texas Inc.

Qualitative and quantitative analysis of vendors has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize vendors as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize vendors as dominant, leading, strong, tentative, and weak.

Market Segmentation

The global market, specifically the domestic segment, offers asset-based lending solutions for businesses seeking short-term debt and cash inflow. This alternative finance instrument is popular among potential investors in regions such as APAC, Africa, and South America. In domestic factoring, all parties - the factor, buyer, and seller - are located in the same country, subjecting them to the same laws and regulations. This form of trade finance and supply chain finance enables sellers to raise funds against their account receivables from domestic buyers. The domestic market's growth is driven by the increasing number of businesses in various regions, making it a promising sector for expansion.

By Type

The market share growth by the domestic segment will be significant during the forecast period. In the domestic segment, all three parties, including the factor, the buyer, and the seller, are based in the same country and are subject to the same laws and regulations. The domestic segment involves all parties, including the factor, buyer, and seller, being based in the same country and subject to the same laws and regulations. This type of factoring provides short-term working capital and cash flow to MSMEs for domestic sales. For instance, if a seller sells a product to a buyer in the same country, the seller can turn to a factor for the domestic segment and raise funds against their account receivables. The domestic segment of the market has been gradually increasing its market share, reaching USD 2,030.52 billion in 2017 and continuing to grow through 2021. Domestic factoring is particularly popular in regions such as APAC, Africa, and South America. As the number of domestic businesses in various regions continues to rise, the domestic segment of the market is expected to grow at an even faster rate during the forecast period.

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The international segment is categorized into three international factors, namely, export factoring, import factoring, and export invoice discounting. Export invoice discounting is utilized when buyers and sellers belong to different countries. In this type of international factoring, the factor provides immediate funds to a business against its unpaid invoices. Export factoring, on the other hand, involves the factor providing services to the seller for goods and services sold to foreign buyers. The import segment involves the factor providing funds to a company to purchase goods or services from sellers in other countries.

Key Regions

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Europe is projected to contribute 60% by 2027. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.

The European market, valued at USD 2.0 trillion in 2020, is primarily driven by major banks, accounting for 85% of invoice finance services. The EU Federation for Factoring and Commercial Finance (EUF) represented 94% of the market turnover, with the top five countries - the UK, France, Germany, Italy, and Spain - accounting for 73%. Invoice factoring contributes to 12.6% of the EU GDP. Invoice factoring involves the sale of accounts receivable to a third party in a secure transaction process. With the growth of information technology, innovative solutions like blockchain are emerging, offering security and credit risk mitigation. Unicsoft, an application area for factoring, provides crypto-solutions for secure and encrypted transactions using smart contracts on platforms like Ethereum, NEO, Hyperledger, and R3CORDA. Factoring applications include domestic, international, cross-border, export factoring, and trade finance. It supports business growth by providing financial support and liquidity, especially for exporters and importers. Blockchain technology can help mitigate financial frauds and improve sales volume in emerging economies. Traditional bank lending faces competition from this centralized and decentralized approach.

Market Analyst Overview

The market is experiencing robust growth, driven by advancements in Natural Language Processing (NLP) and Artificial Intelligence (AI) technologies. This growth is particularly evident in the Supply Chain Finance (SCFs) sector, where financial institutions are streamlining accounts receivable processes and enhancing Business-to-Consumer (B2C) transactions. Traditional methods, such as cheques, are being replaced by more efficient electronic alternatives, with a shift towards cloud-based models and AI-based models for improved accuracy and speed. Furthermore, the market is influenced by factors such as government and factoring group lobbying, the rise of cryptocurrency, and the expansion of international trade. In the healthcare sector, factoring plays a vital role in managing medical insurance claims, laboratory services, ambulatory services, and more, supporting various entities like health centers & hospitals, home health agencies, and rehabilitation centers. Financial services are diversifying with alternative finance instruments, contributing to the market's dynamic growth trajectory.

The BFSI sector is embracing technological advancements, particularly in the adoption of on-premise deployment solutions for enhanced security and control. This includes the digitization of processes with digital documentation, providing streamlined workflows and improved accessibility. Financial institutions are leveraging insights from Financial Institution Insights to optimize operations and decision-making processes. In the healthcare industry, nurse staffing agencies and medical equipment providers are vital components in ensuring quality care delivery. Additionally, various entities in the BFSI sector offer specialized financial services, catering to diverse needs and requirements.

Segment Overview

The market analysis and report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027. The market has been segmented by type, product, distribution channel, and region.

• Type Outlook 
  • Domestic
  • International

• Application Outlook 
  • SMEs
  • Large enterprise

• Region Outlook 
  • North America
    • The U.S.
    • Canada
  • Europe
    • The U.K.
    • Germany
    • France
    • Rest of Europe
  • APAC
    • China
    • India
  • South America
    • Chile
    • Brazil
    • Argentina
  • Middle East & Africa
    • Saudi Arabia
    • South Africa
    • Rest of the Middle East & Africa

Factoring Market Scope
Report Coverage	Details
Page number	156
Base year	2022
Historic period	2017-2021
Forecast period	2023-2027
Growth momentum & CAGR	Accelerate at a CAGR of 7.54%
Market growth 2023-2027	USD 1,720.41 billion
Market structure	Fragmented
YoY growth (%)	6.58
Regional analysis	Europe, APAC, South America, North America, and Middle East and Africa
Performing market contribution	Europe at 60%
Key countries	US, China, UK, France, and Germany
Competitive landscape	Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks
Key companies profiled	ABS Global Factoring AG, American Receivable, Bluevine Inc., CapitalPlus Construction Services, CG24 Group AG, Charter Capital Holdings LP, Deutsche Leasing AG, eCapital Corp., Eurobank Ergasias SA, Factor Funding Co., FirstRand Ltd, HSBC Holdings Plc, Mizuho Financial Group Inc., New Century Financial Inc., PMFBancorp, Riviera Finance of Texas Inc., Societe Generale SA, The Southern Banc Co. Inc., Triumph Business Capital, and Universal Funding Corp.
Market dynamics	Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for the forecast period.
Customization purview	If our market report has not included the data that you are looking for, you can reach out to our analysts and get segments customized.

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What are the Key Data Covered in this Market Research Report?

• CAGR of the market during the forecast period.
• Detailed information on factors that will drive the market growth and forecasting  between 2023 and 2027
• Precise estimation of the size of the market and its contribution to the parent market.
• Accurate predictions about upcoming trends and changes in consumer behavior.
• Market growth analysis across Europe, APAC, South America, North America, and Middle East and Africa.
• Our market trends and analysis report includes a thorough analysis of the market’s competitive landscape and detailed information about vendors.
• Comprehensive analysis of factors that will challenge the growth of market vendors.

 

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