Reverse Factoring Market size is estimated at USD 637.9 billion in 2024 and is projected to cross USD 1938.7 billion by the end of 2037, expanding at more than 10.6% CAGR during the forecast period i.e., between 2025-2037. In 2025, the industry size of reverse factoring is assessed at USD 709.1 billion.
Reverse factoring is a financial arrangement where a large buyer helps suppliers clear financial dues earlier than the agreed-upon payment terms. Industries such as manufacturing, retail, construction, automotive, etc., are the primary users of reverse factoring to streamline capital management. In March 2023, the World Economic Forum (WEF) stated reverse factoring to be vital for small and medium-sized industries operating with limited capital and facilitating industries to strengthen their supply chains. WEF report highlights supply chain finance (SCF) i.e., reverse factoring can play a role in lowering emissions. In 2022, the global SCF award was earned by Henkel for implementing a successful SCF program.
The rising complexity of global supply chains has increased the need for efficient and reliable financing solutions. Reverse factoring helps mitigate the risk of bad debt by transferring the credit risk to the financial institution. In July 2024, a Forbes report stated that PUMA was close to achieving its environmental, sustainability, and governance goals by applying reverse factoring. PUMA collaborates with its banking partners such as HSBC, BNP Paribas, Standard Chartered, and the International Finance Corporation (IFC) on its Nexus digital platform to pay suppliers within 5 days and reduce the manual work involved. The positive growth of PUMA bodes well for the reverse factoring market as more global players adapt the SCF program to strengthen their supply chains.
Growth Drivers
Challenges
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Base Year |
2024 |
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Forecast Year |
2025-2037 |
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CAGR |
10.6% |
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Base Year Market Size (2024) |
USD 637.9 billion |
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Forecast Year Market Size (2037) |
USD 1938.7 billion |
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Regional Scope |
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Category (Domestic, International)
The domestic segment accounts for the highest reverse factoring market share of 88.4% during the forecast period. The segment’s growth is due to reduced complexities compared to international trade regulations and ease of financial transactions. Domestic transactions also facilitate building relationships between buyers and suppliers within the country. Additionally, the reduced costs compared to cross-border transactions boost the segment’s growth. Institutions in this segment are seeking to digitize their platforms to attract more domestic businesses by offering ease of transactions. For instance, in May 2023, Indian Bank launched supply chain finance in its digital platforms and will provide short-term working capital finance to vendors of corporates in the country.
The international segment in the reverse factoring market is projected to witness a rapid increase in revenue share during the forecast period owing to the rising globalization of business. This segment accounts for transactions beyond national borders which increases regulations and complexity, and hence the third party offering SCF must have robust frameworks so that the cash flow is not hindered. The segment’s growth is driven by the rapid expansion of global supply chains that require reliable financing solutions for international transactions. Institutions within this segment are investing in digital platforms to manage cross-border transactions, improve accessibility, and streamline the process. For instance, in August 2019, Standard Chartered and SAP Ariba partnered to make SCP solutions accessible throughout Asia Pacific via the Ariba Network.
Financial Institution (Banks, Non-Banking Financial Institutions)
The bank segment in the reverse factoring market is projected to account for a significant revenue share during the forecast period due to an increase in businesses adopting SCF solutions. Commercial banks play the role of third parties in a buyer and supplier trade agreement and facilitate transactions by paying the supplier early to maintain a steady supply chain. The segment growth is attributed to the higher level of trust that banks enjoy over non-traditional financial institutions due to regulatory oversights. Banks facilitate domestic as well as international reverse factoring making them a viable financial option for numerous local or global market players. Additionally, the segment is growing owing to risk management, digitization of finance platforms, and integration of trade finance solutions such as letters of credit and export credit insurance.
The non-banking financial institutions (NBFIs) segment is estimated to witness considerable growth during the forecast period owing to the rising number of businesses adopting SCF financial solutions. Additionally, NBFIs offer a wider range of services than traditional banks and operate in niche areas of finance. For instance, NBFIs can specialize in specific industries such as healthcare, manufacturing, and IT. The flexibility offered by NBFCs allows them to cater to more businesses, increasing the market reach.
Our in-depth analysis of the reverse factoring market includes the following segments:
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Category |
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Financial Institution |
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End-use |
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Europe Market Analysis:
Europe is projected to register the highest revenue growth of 53.2% in the reverse factoring market during the forecast period. The rapid market growth is attributed to the well-established financial services sector with a multitude of banks and financial institutions offering reverse factoring services to MNCs and SMEs. The robust business activity in various sectors in Europe contributes favorably to creating an SCF ecosystem. For instance, in July 2021, Santander launched a reverse factoring operation under the European Guarantee Fund (EGF) to improve access to finance for SME suppliers.
Germany is projected to hold a dominant share in the reverse factoring market during the forecast period owing to the robust industrial base and reliance on complex supply chains requiring financial solutions. Another key factor of growth is the push for Industry 4.0 to digitize various sectors which is hastening the adoption of fintech solutions that streamline reverse factoring processes. Additionally, artificial intelligence (AI) and machine learning (ML) integration on web-based SCF portals is improving data analytics, benefiting businesses. For instance, SCF platform CRX in Germany has implemented AI and ML integrated analytics in their services.
France is gaining momentum in the reverse factoring market and is estimated to register an upward trajectory during the forecast period. The growth is attributed to the rising demand for SCF solutions in sectors such as retail, aerospace, manufacturing, etc. Businesses in France are seeking solutions to support their supplier networks and strengthen their supply chains. Government support for SMEs is also expected to boost market growth. In December 2020, the government launched the France Num loan guarantee to finance the digitization of very small enterprises (VSE) and small and medium-sized enterprises (SMEs). The scheme was further extended to December 2023. The robust trade regulatory framework in Europe is key to market growth in France due to the ease of business within Europe.
North America Market Analysis
North America reverse factoring market is poised to witness rapid growth during the forecast period due to increasing drive of businesses to optimize cash flow management. Many businesses in the region have adopted reverse factoring financial solutions to maintain a robust supply infrastructure domestically and internationally. Additionally, the region has the presence of several multinational companies in various sectors that source supplies from around the world, leading to greater scalable opportunities for the reverse factoring market by offering fintech solutions.
In the U.S., the reverse factoring market is poised for impressive growth during the forecast period driven by the diverse industrial sector in the country which demands seamless finance solutions to maintain the supply chains. Banks and NBFIs in the U.S. are integrating digitization of their financial platforms to streamline the cash flow process. Rising awareness of blockchain technology is also improving accessibility for all kinds of businesses. For instance, in August 2021, Mitsubishi Corporation of the U.S. purchased metal commodities worth USD 43 million from Peru, and the purchases were made over multiple transactions using Skuchain’s currency-agnostic blockchain.
In Canada, the reverse factoring market is estimated to flourish owing to the presence of robust manufacturing, retail, and natural resources sectors fuelling the demand to maintain supply chains through financial solutions. Due to economic disruptions during the pandemic, there is a greater emphasis on cash flow management, prompting businesses to turn to reverse factoring. The government is making a push to improve the access of companies in Canada to global SCF platforms boosting the market’s rise. In 2020, Taulia announced that its SCF services will be administered via an automated system that can integrate with the ERP systems of the clients making it easier for suppliers to sign up and start using their program.
Some of the key players in the reverse factoring market are:
Author Credits: Abhishek Verma
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