Latin America Factoring Services Market Size, Share & Trends Analysis Report By Type (Recourse, Non-recourse), By End-use (Healthcare, Manufacturing), By Category, By Financial Institution, And Segment Forecasts, 2023 - 2030

Report Overview

The Latin America factoring services market size was valued at USD 145.47 billion in 2022 and is anticipated to grow at a compound annual growth rate (CAGR) of 11.9% from 2023 to 2030. The growth can be attributed to the growing need for alternative financing options for Micro, Small & Medium-sized Enterprises (MSMEs) and the advent of blockchain technology and cryptocurrency. The COVID-19 pandemic created significant challenges for the global economy. Disruptions in the supply chain and the market led to a severe financial impact on enterprises and financial markets. Governments at all levels provided fiscal support to protect firms. In addition, many countries turned to new funding sources to support SMEs.

All the financing option aimed at supporting the SMEs is expected to bear fruit, thus driving industry growth in the coming years. Various companies are opting for factoring services over asset-based lending (loans) from banks, which has increased market growth. Some of the major benefits of factoring services compared to loans include lower approval days, lower interest rates, immediate access to cash, and no collateral requirement, among others. Leading industry players are focused on adopting strategies, such as partnerships with regional players, to gain regional traction, which is fueling industry growth. For instance, in June 2022, JPMorgan Chase & Co. partnered with OmniLatam (Latin America fintech platform acquired by KLYM) to lend to SMEs that supply large corporations in Latin America.

Significant growth in the Banking, Financial Services, and Insurance (BFSI) industry is well-thought-out as a crucial factor in developing an optimistic effect on the growth of the market. Moreover, the increasing requirement for alternative suppliers of/financing for MSMEs is fueling the growth of factoring services. Factoring services enable businesses to find working capital loans and mitigate credit risks. In addition, Artificial Intelligence (AI) and Machine Learning (ML) are anticipated to help in identifying fraud risk, avoid underwriting, provide operational savings, and ease payment application. These technologies have been adopted by fintech and banks to offer innovative products to remain competitive in the market. The COVID-19 pandemic had negative financial implications for MSMEs.

To overcome these challenges, MSMEs significantly adopted factoring services and bill discounting to streamline their processes, which is projected to support the growth of the market. Moreover, banks across the region have been widening their outreach to MSMEs, especially agribusiness. For instance, in June 2022, FIRA (Trust Funds for Rural Development), a development bank, partnered with PrimeRevenue, Inc., a Fintech solution provider, to streamline the funding of FIRA with its customers, mostly MSMEs in the agricultural, forestry, and fishing sectors. Such initiatives targeting MSMEs are the major factors expected to drive the growth of the market over the forecast period. Among the various factors derailing the industry growth include the data breaches resulting from cyber-attacks.

For instance, in January 2022, the Brazilian central bank reported a data leak of 160,000 PIX keys, Brazil’s instant payment system, between December 3rd and 5th, 2021. However, the bank notified that no sensitive data, such as transaction information and passwords, were leaked. Furthermore, efforts taken toward improving cyberspace security in the region are expected to reduce the impact of the aspect mentioned above. For instance, in December 2022, World Bank sanctioned USD 200 million to Argentina for the improvement of the country’s digitalization progress and cybersecurity, among others. Such initiatives are expected to positively impact the growth of the market in the coming years.

Category Insights

The domestic segment accounted for the largest share of 90.6% in 2022. The growth of the segment can be credited to the quick embracing of the factoring receivable methods in main industries owing to their effectiveness. Moreover, the rising importance of electronic invoices has added to the consolidation of the domestic factoring market. In addition, domestic factoring enables businesses in receiving a weekly/monthly analysis of sales and payable invoices. Categories of domestic factoring consist of full factoring, maturity factoring, advanced factoring, undisclosed factoring, and invoice discounting. Numerous companies provide factoring services to focus on the high domestic needs for goods and services.

The international segment is anticipated to grow at the fastest CAGR during the forecast period. Some of the major benefits include rapid growth, turnaround situation, and trading with countries outside of the bank’s jurisdiction. These benefits have fueled the growth of the international segment. Moreover, new platforms which facilitate cross-border factoring services have been coming up regarding the demand for international factoring services, which is driving the growth of the segment. For instance, in April 2022, FCI launched Edifactoring 2.0, to tackle challenges faced in cross-border factoring. The two-factor platform will help bridge foreign languages and local law gaps for enabling smoother communication.

Type Insights

The non-recourse segment accounted for the largest share of 57.7% in 2022 and will expand further at the fastest CAGR from 2023 to 2030. Non-recourse factoring is a perfect option for businesses, which have a large customer base and want to clean off their balance sheet by removing their accounts receivable. Furthermore, non-recourse factoring is widely used among truckers to ensure financial security when it comes to getting paid on loads. For instance, eCapital, a financial services company that supports SMEs by accelerating their access to capital, also offers fleet fuel cards that trucking companies can use for making payments at truck stops. These cards provide discount pricing to trucking companies and allow them to view real-time transactions, prepare fuel tax reporting, and set purchase control so that they stay informed of all business-related expenses.

The recourse segment is also anticipated to have steady growth during the forecast period. Recourse factoring offers all facilities except debt protection. It is the most common factoring service where a company buys back invoices that a factoring company is unable to collect payments on. This factoring is widely used by several organizations to sell invoices at the lowest discounts. Furthermore, it offers several benefits, such as quick cash flow for urgent needs, cheaper options for invoice sellers, a fast approval process, and no obligation for the client to handle collection among others. The benefits of using recourse factoring services will pave way for the growth of this segment during the forecast period.

Financial Institution Insights

The banks segment accounted for the largest share of 78.1% in 2022. The segment growth can be attributed to the growing adoption of blockchain technology platforms, increasing digital payment systems, and rising investments in advanced technologies (distributed ledger technology). Several banks perform an important trade finance service by helping users convert their receivables into cash, thus addressing the constraints of cash flow and working capital with the help of blockchain technology. Furthermore, cross-border transactions, clearing and settlements, digital identity verification, and credit reporting are anticipated to drive the acceptance of blockchain technology in several public and private sector banks.

The Non-banking Financial Institutions (NBFIs) segment is anticipated to register the fastest CAGR during the forecast period due to the presence of a large number of non-banking firms providing factoring services in the region. For instance, Latam Trade Capital offers international factoring and inventory factoring among others. Also, the company operates in counties including Chile, Columbia, Peru, and Brazil. The presence of such companies offering multiple factoring solutions, and offering those solutions to multiple Latin American countries, is expected to have a significant effect in driving the growth of the non-banking financial institutions segment.

End-use Insights

The manufacturing segment accounted for the largest revenue share of 31.5% in 2022. Manufacturing companies use factoring services for converting their bills receivables to cover their operating expenses. Instead of loans with higher interest, manufacturing companies prefer invoice factoring for instant cash payments without the need for an extensive and time-consuming documentation process. Furthermore, companies that require immediate cash and fail to qualify for traditional funding & series funding opt for invoice factoring to raise money to secure the desired operating capital and optimize their manufacturing process with improved cash flow stability. The healthcare segment is expected to register the fastest CAGR during the forecast period.

Healthcare service-providing companies with outdated payment and billing systems can be notorious for the overall healthcare industry. Increasing complications in the insurance & bureaucracy layers and outstanding medical bills for several weeks or months are forcing medical companies and healthcare centers to turn to factor services to manage the cash flow of hospitals or companies. With healthcare factoring services, hospitals can raise instant cash to optimize their inventory of emergency medical supplies, such as OT supplies, surgical instruments, and organic chemicals & medicines. The wide variety of factoring services covering the major financing part of the healthcare segment is expected to fuel the growth of the segment.

Country Insights

Brazil held the largest share of 31.8% of the overall revenue in 2022. The Brazilian government has been coming up with regulations targeting digitalization, which is expected to help adopt digital factoring services, unlike traditional factoring services. For instance, in February 2021, Brazil introduced new laws for NF-e invoices. The major highlight of the new law includes invoices connected to factoring transactions that can no longer be canceled. These initiatives by the government would further supplement the growth of the regional market during the forecast period.

Peru is anticipated to register the fastest CAGR during the forecast period. Peru has been proactive in developments in factoring services. The county digitalized electronic invoice factoring in January 2022. SUNAT, the country’s tax authority, approved the resolution, Decreto de Urgencia N° 013-2020. Some of the major factoring objectives include linking invoices with factoring invoices, which enables receiving cash for keeping business operating and promoting the growth of SMEs with an aim of increasing formal employment in the country. These factors are expected to boost the market growth in the country.

Key Companies & Market Share Insights

Key players are investing resources in research & development activities to support growth and enhance their internal business operations. The report will include company analysis based on their financial performances, product benchmarking, key business strategies, and recent strategic alliances. Companies are engaging in mergers & acquisitions and partnerships to further upgrade their products and gain a competitive advantage in the market. They are effectively working on new product development, and enhancement of existing products to acquire new customers and capture higher market shares.

For instance, in September 2021, Hitachi Capital (U.K.) PLC announced the rebranding of its trading styles and a change in its corporate name following a merger of its parent company (Hitachi Capital Corp.) with Mitsubishi UFJ. The company’s new name was Mitsubishi HC Capital U.K. PLC and the complete implementation of the rebranding procedures was completed in April 2022. Mitsubishi UFJ’s strong client network and brand representation helped Mitsubishi HC Capital U.K. PLC in augmenting its market revenue significantly. Some of the prominent players in the Latin America factoring services market include:

• Accion International

• Barclays Plc

• BNP Paribas

• BTG Pactual

• Deutsche Factoring Bank

• FINAMCO

• Hitachi Capital (UK) PLC

• HSBC Group

• Mizuho Financial Group, Inc.

• SMB

• TRADEWIND GmbH

Latin America Factoring Services Market Report Scope

Latin America Factoring Services Market Report Segmentation

This report forecasts revenue growth at regional and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2018 to 2030. For the purpose of this study, Grand View Research has segmented the Latin America factoring services market report based on category, type, financial institution, end-use, and country:

• Category Outlook (Factoring Volume, USD Million, 2018 - 2030)

  • Domestic

  • International

• Type Outlook (Factoring Volume, USD Million, 2018 - 2030)

  • Recourse

  • Non-recourse

• Financial Institution Outlook (Factoring Volume, USD Million, 2018 - 2030)

  • Banks

  • Non-banking Financial institutions (NBFIs)

• End-use Outlook (Factoring Volume, USD Million, 2018 - 2030)

  • Manufacturing

  • Transport & Logistics

  • Information Technology

  • Healthcare

  • Construction

  • Others (Staffing Agencies, Advertising, Oilfield Services, and Commercial Food & Beverages, among others)

• Country Outlook (Factoring Volume, USD Million, 2018 - 2030)

  • Latin America

    • Brazil

    • Mexico

    • Chile

    • Peru

    • Argentina

    • Paraguay

    • Uruguay

    • Ecuador

    • Colombia

    • Bolivia