Industry: IT and Telecommunication
Published Date: September-2024
Format: PPT*, PDF, EXCEL
Delivery Timelines: Contact Sales
Number of Pages: 188
Report ID: PMRREP34770
The US factoring services market is estimated to reach a valuation of US$598.1 Bn by 2031 from a value of 325.1 Bn recorded in 2024. The market is estimated to secure a CAGR of 9.1%, during the forecast period 2024 to 2031. The rising adoption of Machine Learning, Natural Language Processing, and Artificial Intelligence is anticipated to create lucrative growth opportunities for the U.S. factoring services market in the years to come.
Key Highlights of the Market
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Market Attributes |
Key Insights |
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US Factoring Services Market Size (2024) |
US$325.1 Bn |
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US Factoring Services Market Size (2031) |
US$598.1 Bn |
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Forecast Growth Rate (CAGR 2024 to 2031) |
9.1% |
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Historical Growth Rate (CAGR 2019 to 2023) |
7.7% |
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Category |
Market Share in 2024 |
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Factoring Type - Domestic |
68% |
The US factoring services market is segmented into domestic and international based on factoring type. Among these, the domestic factoring type leads the market with around 68% of the total market share. Domestic factoring dominates over international factoring due to limitations in geographic coverage and legal obstacles.
The demand for factoring services inside domestic markets is experiencing significant growth in emerging economies, mostly due to the rapid increase in small and medium-sized enterprises (SMEs) in the nation. These firms are essential in boosting the country's GDP growth.
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Category |
Market Share in 2024 |
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Enterprise Size - Small & Medium Enterprise |
58% |
The US factoring services market is categorized into small & medium enterprises and large enterprise based on enterprise size. Among these, the small & medium enterprises segment dominates the market.
Small and medium-sized enterprises (SMEs) that operate in sectors they are not familiar with sometimes encounter difficulties in obtaining inexpensive financial resources. Consequently, small and medium-sized enterprises (SMEs) are increasingly using factoring services, which is contributing to the growth of the market.
Factoring is designed to facilitate small and medium-sized enterprises (SMEs) access to trade finance and enhance their involvement in value chains. It distinguishes itself from both typical bank lending and asset-based lending by not creating any debt on the company's financial statement and having no outstanding loans. This facilitates small and medium-sized enterprises (SMEs) in generating money without any onerous obligations.
Factoring is a financial service provided by banks or third-party financial service providers.
It involves a seller trading their accounts receivables to a factor at a discounted rate to acquire funds. In recent years, the US factoring services market share has been consistently growing due to the rising need for alternative financing choices among small and medium firms.
Factoring services provide firms with the opportunity to obtain working capital loans and mitigate credit risks. The increasing use of cutting-edge technologies such as Artificial Intelligence (AI) and machine learning is expected to improve the detection of fraud risks, generate cost savings in operations, and simplify payment procedures.
The market growth has been primarily driven by several factors. These factors include the increasing use of commerce, and the growing number of small and medium-sized enterprises (SMEs) that are seeking flexible financing options.
Advancements in technology have streamlined the process of factoring enhancing its accessibility and efficiency for firms of various scales. Fluctuations in the economy modifications in regulations, and shifts in industrial patterns persistently impact the US factoring market size.
In 2019, the US factoring services market began on a positive note buoyed by a strong economic backdrop characterized by stable GDP growth and favourable credit conditions. Small and medium-sized enterprises in particular increasingly turned to factoring as a flexible financing option amid tightening traditional credit lines. The market secured a CAGR of 7.7% during the period from 2019 to 2023.
Factors such as improved technology integration in factoring processes and the growing acceptance of alternative financing solutions further propelled market expansion. Post-pandemic recovery marked the years 2021 to 2023 with the market experiencing accelerated growth.
Factors such as increased business confidence, expansion in industries like healthcare, manufacturing, and construction, and the growing acceptance of factoring among larger corporations contributed to factoring services market expansion in the United States.
The U.S. factoring services market is expected to experience significant growth over the next few years owing to the demand for flexible financing solutions and the need for improved cash flow management among businesses. The market is estimated to record a CAGR of 9.1% during the forecast period.
Increased adoption of Fintech Solutions
The adoption of Fintech is being propelled by the growing recognition of the advancements in financial technology, which encompasses money transmission and payments, budgeting and financial planning, financing, saving and investment, and insurance.
The majority of payment service providers instil confidence in small business proprietors, thereby encouraging them to enter the market. For instance, International Fintech, a licensed e-money institution and payment service provider, offers Fintech solutions to small business proprietors. Automated solutions for volume payments and related services in the financial sector are among these solutions.
The majority of institutions are reluctant to issue numerous pay checks, which is why an automated solution provided by Fintech solution providers is implemented. Fintech provides mass payment services at reasonable rates. This allows small and medium-sized enterprises (SMEs) to interact with fintech companies, thereby increasing the return on investments (ROI) of the factors, such as banks and third-party insurers.
Utilization of Blockchain Technology
The advent of information technology has led to a significant revolution in the US factoring services business. Cutting-edge technology in the financial sector has introduced automation into the transaction process within the factoring services industry
The adoption of automated solutions has not only strengthened the financial industry but also enhanced security and planning solutions. The implementation of cryptographic solutions has improved the accuracy of transactions and protected the confidential data of all parties engaged in the factoring process. This has effectively reduced the possibility of financial fraud.
Unicsoft, a provider of solutions for blockchain, has identified multiple places where firms are incorporating blockchain technology into the factoring process. Moreover, the production procedures are heavily reliant on a secure and efficient workflow process. Therefore, the integration of blockchain technology enhances financial transactions in the factoring industry by employing a centralized and encrypted method and incorporating smart contracts.
Ethereum, NEO, Hyperledger, and R3CORDA are instances of open blockchain platforms. Out of these choices, the Ethereum platform is the most preferred. The platform enables the distributed storage and execution of a smart contract, with the hashing process being carried out on the user's local device.
Stringent Regulatory Policies
US Factoring companies may encounter obstacles due to the complexities and uncertainties of regulations. It may be challenging for factoring services market companies in the United States to operate in new markets because the licensing requirements for operators vary across different countries.
It can be costly and time-consuming for factoring companies to remain compliant with changing regulations. The flexibility of factoring services may be restricted by certain regulations, which may limit the types of transactions that can be conducted or the fees that can be charged.
The overall market expansion is impeded by the complex regulatory landscape, which discourages some factoring services companies from entering new markets. The lack of transparency or predictability in regulations across various regions may also serve as a deterrent to businesses that are interested in factoring services.
Increased Open Account Trading
The demand for an alternative source of finance among start-ups and SMEs is on the rise owing to the expansion of the manufacturing industry in the United States and the developing market for open accounts in small and medium enterprises (SMEs).
BFSI organizations are adopting and advancing machine learning methodologies to analyze immense quantities of data and offer pertinent insights to clients. The US factoring services market is expanding as a result of the heightened investments in artificial intelligence and sophisticated machine learning by banks and fintech companies.
The objective of the investments is to enhance the automation process and offer consumers a more personalized and efficient experience. The procurement of financial resources for small and medium-sized enterprises (SMEs) facilitates their trade activities. This encompasses the provision of support for a variety of payment methods, including cash advances, letters of credit, documented collections, and open accounts. Consequently, this promotes the growth of the factoring service industry in the United States.
The market is characterized by a dynamic competitive landscape shaped by a mix of traditional financial institutions and innovative fintech companies. Key players in the market include established banks offering comprehensive factoring solutions alongside specialized factoring firms focusing on niche industries and tailored financial products.
Leading banks and financial institutions leverage their extensive networks and robust financial infrastructures to offer broad-based factoring services catering to a wide spectrum of industries and client sizes. These players emphasize reliability, scalability, and integrated financial solutions to maintain a competitive edge in the market.
Recent Developments in the US Factoring Services Market
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Attributes |
Details |
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Forecast Period |
2024 to 2031 |
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Historical Data Available for |
2019 to 2023 |
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Market Analysis |
US$ Billion for Value |
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Key Market Segments Covered |
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Key Companies Profiled |
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Report Coverage |
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Customization & Pricing |
Available upon request |
By Factoring Type
By Provider Type
By Enterprise Size
By End User
To know more about delivery timeline for this report Contact Sales
The market is estimated to exhibit a CAGR of 9.1% during the forecast period from 2024 to 2031.
A few of the key players in the market are Wells Fargo Capital Finance, CIT Group Inc., and JPMorgan Chase Bank.
An opportunity lies in the Increased open account trading.
Domestic factoring is the dominant factoring type in the market.
Increased adoption of fintech solutions remains a key driver for market growth.
