Fresh statistics indicate that the total worldwide volume for factoring had a modest increase in 2013 of nearly 5% growth in Euro or nearly 10% in U.S. dollars compared to 2012. The world factoring total stands now at € 2,230 Billion, and in US Dollar terms, US $ 3,079 Billion, in other words, well over US $ 3 TRILLION for the first time in our history!
Overall, the factoring industry has weathered the financial crisis and subsequent global recession much better than many other providers in the financial services sector. Domestic factoring accounted for EUR 1,828 billion of the overall volume; accounting for 82 per cent of the total. Compare that to international cross border factoring, which totalled EUR 403 billion, accounting for 18 per cent of the total. Since the start of the financial crisis over the past five-year period, factoring volume has been growing at a rate of 15 per cent per annum, adding nearly One Trillion Euro in annual factoring volume during this time. The industry practically doubled in size during this period, a substantial feat considering the modern era of factoring began over a century ago in the United States.
International factoring delivered a five-year compound annual growth rate (CAGR) of 24.8 per cent. This is far above the 13.1 per cent CAGR for domestic factoring, meaning that international cross border factoring volume increased nearly two times faster compared to domestic growth. The increase in cross border factoring has again been driven by an rise in open account trade, especially from suppliers in the developing world, pushed by the major retailers/importers in the developed world, including the acceptance of factoring as a suitable alternative to traditional forms of trade finance. China has played the most important role in this impressive international growth story over the past five years, increasing at a rate of 54% per annum, and becoming the largest factoring market in the world today.
From a regional perspective, Europe is the largest factoring market in the world, accounting for 60% of the world total and the region increased by 4.3% compared to the previous year. Asia is the second largest, accounting for 27% of the world total and the region increase by 4.7%. And the Americas is the third, accounting for 9% of the world total, increasing by 2.1%.
There were a number of markets that performed quite well. Countries with double digit growth include China (+10%), Hong Kong (+10%), Korea (+54%), Singapore (+15%), Austria (+29%), Croatia (+39%), Poland (+29%), Russia (+19%), Colombia (+55%), Peru (+253%), Morocco (+49%), UAE (+21%), India (+44%), and Australia (+26%).
As a group, FCI members contributed more than 60% of the total global factoring volume in 2013, but when one compares the contribution to total international factoring volume, FCI member’s share tops nearly 90%. That means nearly all of the cross border factoring volume reported originated from FCI members. The results illustrate that exporters and importers around the world are becoming more and more familiar with the advantages to be derived from a factoring arrangement: working capital, credit risk protection and collection service for the exporter, while the importer benefits from purchasing on open account terms.
Mr. Peter Mulroy, Secretary General of FCI was asked to comment on the recent statistics. He expressed confidence that the factoring industry is well positioned to play an important role as more and more banks and non-bank financial institutions engage in the open account supply chain finance space.
He added the comment: The factoring industry is today at a cross roads. The industry continues to grow, albeit not at the same robust pace as compared to the three years following the start of the financial crisis. Yet the industry added a trillion euro, nearly doubling in size during the most challenging of economic times. FCI led the charge, overseeing the explosion in open account trade from East to West. Central Bankers around the world have looked at this growth story and have come to appreciate the product as a safe and secure means of financing open account trade. In fact, the economic crisis has resulted in an increased favorable view of factoring. Governments have come to appreciate the important role factors play in financing SMEs, the engine of growth in most economies. There are many challenges ahead, but factoring continues on a strong path and has become one of the services of choice for many financial institutions around the world.