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The Brainy Insights, a market intelligence firm, has projected that the global invoice factoring market, valued at $2.74 trillion in 2022, is set to surge to a whopping $6 trillion by 2032. This remarkable growth can be attributed to the widespread adoption of machine learning (ML), natural language processing (NLP), and artificial intelligence (AI), which are expected to unlock profitable expansion opportunities for factoring in the coming years.
Furthermore, the collaborative approach adopted during the COVID-19 outbreak, with banks and Supply Chain Finance (SCFs) working together to benefit client ecosystems, has contributed to the market’s positive trajectory.
One of the key highlights of the invoice factoring market is the Asia-Pacific region, which is expected to experience the highest compound annual growth rate (CAGR) of 11.37% throughout the forecast period. This growth can be attributed to the expanding manufacturing sectors in countries such as India and other Southeast Asian nations.
These economies are rapidly transitioning from agricultural-based economies to manufacturing and export-oriented ones, thereby fueling the expansion of invoice factoring in the region. Moreover, the Asia-Pacific region boasts several emerging economies, including China, Thailand, India, and the Philippines, which are attracting investments from saturated developed markets seeking new business prospects.
It is worth noting that small and medium-sized firms (SMEs), which comprise over half of all businesses in the Asia-Pacific region, frequently seek financial assistance to ensure the smooth functioning of their operations.
In terms of market segmentation, the international segment is projected to exhibit the highest CAGR of 10.49% during the forecast period in the invoice factoring market. Regardless of the size or sector, international factoring services are essential for companies engaged in global business activities.
The growing prevalence of open account trading has propelled the expansion of this market segment, with importers in industrialized nations considering factoring as a viable alternative to traditional forms of trade financing. Additionally, a heightened awareness of global trade and the relocation of production facilities from China to economies like Vietnam, Mexico, and the Philippines following the COVID-19 pandemic have further contributed to the growth of the international segment.
Another notable segment expected to witness significant growth is the non-recourse segment, with an anticipated CAGR of 10.75% over the projected period. Non-recourse factoring services are particularly prevalent in developing countries, offering firms complete credit security, which acts as a primary driver of growth.
Businesses with a diverse customer base often choose non-recourse factoring to streamline their balance sheets. In this case, the factoring company assumes responsibility for any bad debt, leading to stricter credit standards. Non-recourse factoring is frequently employed by truckers at the bottom of the supply chain, as they seek financial stability when receiving payment for their cargo.
Furthermore, the non-banking financial institutions segment is expected to register the highest CAGR of 10.99% in the invoice factoring market during the projected period. This growth can be attributed to the flexibility and transparency provided by non-banking financial institutions to their customers. In order to compete with traditional banks, these institutions are increasingly adopting cutting-edge technologies.
For instance, RTS Finance, one of the leading invoice factoring companies in the trucking industry, offers mobile and online browser applications to enhance platform interaction. Truckers can track the progress of their transactions and enjoy various benefits, including savings on fuel cards and the absence of hidden fees for automatic clearing or invoice submission.