Reverse Factoring Market Analysis

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: