Factoring Volume Growth Shows Mixed Regional Results David Gustin - June 22, 2016 2:11 AM | Categories: | Tags: Bluevine, eFactoring, FCI, Fundbox, Merchant Cash Advances Factors Chain International (FCI), a network that includes over 290 factoring companies worldwide, gathers factoring volumes through its local members and can get a per country view on volumes (although there are organizations that are not members so that data would be missed). The data may not be totally comprehensive but it gives us a good estimate at factoring volumes globally. According to FCI data, Factoring achieves all-time high in 2015: € 2,373 billion euros, up 1.4% from 2014 However, the growth recorded in 2015 is well below the seven-year trend annual growth rate (CAGR) of 9% Domestic factoring accounted for €1,843 billion (78% of the total market) and international factoring €530 billion (22%). Highest regional growth seen in Europe (+6%) with Romania, Hungary and Egypt demonstrate particularly strong country growth Asian, American and African regional factoring markets fall 8%, 6% and 13% respectively So the data begs some questions, why the sharp drop of factoring volumes in Asia and Americas while Europe grew? As a region, Europe accounts for 66% of the world’s factoring market. The growth there has mainly been driven by the strategic emphasis towards factoring by the commercial banking sector which controls approximately 90% of Europe’s factoring volume. China is the largest market Asia with a volume of €352.88 billion (-13%), its share of the regional factoring market is now 63%. Graph of Global Factoring Market According to Peter Mulroy, FCI secretary general, “Companies in Asia are more reluctant to purchase in larger quantities due to the decline in retail sales in the greater China region and the uncertainty that brings to the market. The decline in commodity prices has also impacted volume, resulting in reduced valuation of invoices. However, some expect the slack to be taken up by new players and new entrants in the markets, from the numerous independent commercial factors that have evolved in China, fintechs, and the smaller city and regional banks, which are growing in influence.” Conclusion The movement to online factoring models in the USA for small business – Fundbox and Bluevine as examples, will be interesting to monitor. In Latam, we have efactoring options that are increasing across the Region. I wrote recently about Peru’s efforts to make an invoice a tradeable asset - How EInvoicing is Turning Invoices into Currencies in Latam We also have the Merchant Cash Advance products which are targeted at certain industry sectors. Merchant cash advance financing requires no third party interaction with the borrower’s customers. With the MCA, you send your historical credit card or ledger sales data and you can have an advance later today – marketplace lenders have developed these products. Also, more and more B2B commerce platforms continue to roll out versions of this product, including Shopify, EBay, and others. We have yet to see a sign that the P2P transactional early pay techniques have made significant inroads in the factoring market, but perhaps that will come as vendors enhance their managed services and funding capabilities. One suggestion to the FCI as they collect their data – broaden what you collect, because technology has changed how factoring is delivered to end users. Don't forget to sign up for TFMs weekly digest delivered to your inbox every Monday here Related Articles Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.