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According to the 2024 FCI Annual Review, the global factoring industry has a 8.4% 20 year- compound annual rate of growth. This is an impressive growth rate, but importantly, there is still a significant chance for the industry to grow further.

What needs to happen for this to take place?

Deepesh Patel, Editor, Trade Finance Global, spoke to Kevin Day, CEO, Lendscape, at FCI’s 56th Annual Meeting in Seoul to discuss some of these key trends and ideas. 

Impacting the world of receivables finance and factoring 

Lending is never an easy business, especially when there are numerous macroeconomic challenges. 

To try to create a more seamless process, Lendscape supplies software and technology to banks and non-banks around the world in support of their factoring, business discounting, asset-based lending (ABL), and supply chain finance businesses with the goal of enabling smarter lending. 

This is done by reducing the cost of lending, making lenders themselves more efficient by driving a more digital agenda and enabling lenders to expand their markets and to deliver critical funding to small and medium-sized enterprises (SMEs) – the backbone of the economy. 

With significant changes taking place in the wider asset-backed finance landscape, market participants face several headwinds. Historically, financial products in the commercial finance sector have been excellent products, enabling businesses to unlock their balance sheets and generate working capital. 

However, Day said, “As a marketplace, I think we tend to overcomplicate things. And I think what we can see is opportunities to, by using digitalisation, offer a much more simplified lending solution.” Increasing simplicity expands the growth potential and enables lenders to support the market. 

Lendscape CONNECT seeks to connect the dots between the various technologies in the space, including data extraction technology to take data out of clients’ enterprise resource planning (ERP) and accounting software, for solutions for tracking and monitoring detailed shadow ledgers. 

Day said, “Essentially, we take that data from the accounting software, bring it into the lender’s environment to normalise it, effectively taking data and converting it into information.”

The new system automates borrowing-based calculations by using data to determine the amount of money that can be lent. This process happens without human intervention, providing SMEs with a hands-free experience.

For lenders, it maintains control over the assets while offering a more efficient and user-friendly service to borrowers.

This type of technology fits in directly with FCI’s focus of growing international trade by supporting new and innovative projects.

Day said, “When a client raises an invoice, and it is electronically sent to and received by the lender, it can be integrated into the FCI factoring system. The whole thing can become a big digital ecosystem.”

Linking technology and education: Adapting products to address the needs of emerging markets 

With the conference taking place in South Korea at the heart of ASEAN, the development and growth of factoring as an industry across different geographies was a key theme. 

One of the main challenges identified is the difference usage of factoring in the West versus its usage in emerging and developing markets.

In this respect, Lendscape is well positioned to either address the unique character of this slightly different segment and/or develop products that are better suited to the factoring industry in these fast-growing developing and emerging economies. 

One priority for Lendscape in this respect is sharing knowledge. With extensive amounts of knowledge and best practices established over many years in developed markets, Day said, “I think it is our duty to actually make that knowledge available to the developing markets. Why learn those hard lessons that have been learned previously?” 

As a strong advocate of training, Lendscape sponsors the education programme of FCI. Moreover, in terms of actually making technology available, there are important accompanying factors to share, such as the presentation of the built-in knowledge and expertise that develops around such utilities. 

Day said, “And so I think by making that technology available, best practice, training, and education, I think we can actually help all of these markets to develop and grow successfully.” 

This educational role through FCI Academy for a technology company such as Lendscape is important, as it provides a return on investment. Day said, “I think when you talk about education, you talk about investing in people. And by investing in people, effectively, you are building up your human capital, and that then actually supports your business as it grows. What we get out of it, really, is the fact that it makes our lives easier.” 

As the technology is built around best practices, the more organisations that adopt best practices, and more operations become more effective and streamlined. 

Day said, “So effectively, we are also helping ourselves. But of course, as well, we want to see this product grow. We believe in this financial product. We think it is really good for supporting SMEs, and we want to make sure that we are at the heart of actually driving forward and helping organisations push and encourage and nurture this business.” 

The landscape of global market growth is showing some impressive trends, particularly in emerging economies. Day said, “Obviously, it’s from a small base, but the growth is very dramatic, especially in Africa and other emerging markets.” This growth contrasts with the patterns observed in developed markets where many products have reached a saturation point in terms of adoption.

In developed economies, the dynamics are shifting as traditional financial institutions face increasing competition from fintech companies. This challenge has spurred innovation, prompting organisations to reassess and revitalise their offerings. 

Day said, “Organisations are looking at how they can repackage and reposition their offerings to make the borrowing experience much easier for the end user.”

Such strategic adjustments are essential for transitioning certain financial products from niche alternatives into mainstream lending solutions, which are poised to significantly support business development and economic growth.