Factoring Market size is set to grow by USD 1720.41 bn from 2023-2027, growing need for alternative sources of financing for msmes to boost the market growth, Technavio

NEW YORK, May 13, 2024 /PRNewswire/ -- The global factoring market  size is estimated to grow by USD 1720.41 bn from 2023-2027, according to Technavio. The market is estimated to grow at a CAGR of  7.54%  during the forecast period. 

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Key Market Trends Fueling Growth

• Bitcoin, as the most modern cryptocurrency and financial technology, is revolutionizing the financial sector through its underlying technology, blockchain.
• Blockchain's potential to transform industries, including factoring, is evident with NASDAQ's adoption for its private share-trading market. International players in the Fintech industry, such as Payment service providers, FundBox, and Accounting software, are investing heavily in blockchain technology.
• Market expansion is fueled by the adoption and evolution of blockchain technology, heralding a new era of innovation.
• Blockchain, the foundational technology behind cryptocurrencies like Bitcoin, is increasingly recognized as a mainstream payment solution, catalyzing value appreciation.
• The transformative potential of blockchain extends across diverse sectors, with notable applications observed in industries such as factoring and stock markets.
• Illustrating this potential is the integration of blockchain by the National Association of Securities Dealers Automated Quotations (NASDAQ) within its private share-trading market, underscoring blockchain's efficacy in driving industry evolution.

Market Challenges

• The factoring market encounters challenges due to weak tax, legal, and regulatory frameworks, particularly in developing countries with inadequate infrastructure.
• Collecting receivables from government-owned firms and managing current portion of long-term debt (CPLTD) can strain working capital for corporates. 
• A significant hurdle to market expansion in developing nations is the absence of robust regulatory frameworks governing debt recovery mechanisms.
• Challenges within the factoring services market stem from deficiencies in tax, legal, and regulatory structures, impeding smooth operations.
• Inadequate infrastructure exacerbates receivables collection bottlenecks, particularly pronounced in developing economies.
• Factors encounter obstacles when collecting payments from government-owned entities, complicating debt recovery processes.
• Traditional accounting practices classify the current portion of long-term debt (CPLTD) as a liability, representing funds due within the current period, reliant on converting current assets into cash.
• Consequently, enterprises with substantial fixed assets and CPLTD face tighter working capital constraints, resulting in negative working capital scenarios.

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Segment Overview 

This factoring market report extensively covers market segmentation by

1. Type 
• 1.1 Domestic
• 1.2 International
2. Application 
• 2.1 SMEs
• 2.2 Large enterprise
3. Geography 
• 3.1 Europe
• 3.2 APAC
• 3.3 South America
• 3.4 North America
• 3.5 Middle East and Africa

1.1 Domestic-  In the burgeoning factoring market, emerging economies play a pivotal role, particularly in the realm of trade finance. Value chains are optimized through innovative solutions like supply chain finance, which bridges the gap between traditional bank lending and asset-based lending. Debt capital is a crucial component, attracting potential investors seeking lucrative returns. Factoring, an essential form of asset-based lending, facilitates the conversion of accounts receivable into immediate funds. This financial service is not limited to industries but extends to various sectors, including medical insurance claims, laboratory services, ambulatory services, health centers & hospitals, home health agencies, and rehabilitation centers. The factor, acting as a financial intermediary, purchases the seller's accounts receivable at a discount rate, providing the seller with much-needed funds against invoices. Buyers, in turn, benefit from extended payment terms, enhancing their cash flow management. Advancements in technology, such as machine learning (ML) and artificial intelligence (AI), are revolutionizing factoring processes. Cheques are increasingly being replaced by electronic alternatives, and automation is streamlining on-premise deployment and digital documentation. Cloud-based models and AI-based models are gaining popularity, offering greater efficiency and flexibility. Cryptocurrency is another disruptive technology, potentially transforming international trade by enabling seamless cross-border transactions. The bank segment continues to dominate the factoring market, but non-bank financial institutions are making significant strides, offering competitive pricing and innovative solutions.

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Research Analysis

The Factoring Market is a significant segment in the financial services industry, leveraging advanced technologies such as Machine Learning (ML) and Artificial Intelligence (AI) to streamline processes for financial institutions. ML and AI are particularly useful in automating accounts receivable processes, enabling the swift processing of cheques and electronic alternatives. On-premise deployment and cloud-based models are used interchangeably, depending on the specific requirements of factoring companies. AI-based models are increasingly being adopted for tasks like credit risk assessment, debt collection, and capital management. Potential investors, including those in the trade finance and supply chain finance sectors, are keen on the potential returns offered by factoring. The factoring market also extends to various industries like international trade, medical insurance claims, laboratory services, ambulatory services, home health agencies, nurse staffing agencies, rehabilitation centers, and more. Cryptocurrency is an emerging trend in factoring, offering new opportunities for innovation and growth.

Market Research Overview

The Factoring Market, represented by MAChinLeArning (ML) and Artificial Intelligence (AI), plays a crucial role in the financial industry. Financial institutions (FI) and alternative lenders (AI) utilize factoring to provide businesses with immediate cash flow solutions. Factoring involves the purchase of accounts receivable (AR) at a discount, providing businesses with cash for their outstanding invoices. This process is essential for businesses, particularly those with slow payment cycles or cash flow issues. The CrypTOcurrency market also influences factoring, with the integration of blockchain technology enabling secure and efficient transactions. Additionally, the increasing use of machine learning and AI in credit assessment and risk management enhances the efficiency and accuracy of factoring services. Overall, the factoring market is a dynamic and evolving sector that continues to adapt to the changing needs of businesses and the financial industry.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• Type
• Domestic
• International
• Application
• SMEs
• Large Enterprise
• Geography
• Europe
• APAC
• South America
• North America
• Middle East And Africa

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio's report library consists of more than 17,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio's comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

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SOURCE Technavio