A few weeks ago, I had the opportunity to participate in a webinar organized by SME Banking Club on digitalization in factoring. One of the speakers was Betül Kurtulus from FCI and she showed a very interesting presentation. One of the topics was “10 Factoring predictions in a post-covid world”.
I will focus on a few of the most interesting.
The rise of fintech and the success they have experienced over these past few years. However, Betül predicts that we will see numerous fintech go out of business, stemming from losses, frauds, and an increased challenge to raise capital. In my opinion, even though we will certainly see a few bankruptcies, the technological progress and increasing amounts of money invested in artificial intelligence will allow you to avoid losses caused by fraud or extortion of funds by criminals. Remember that today’s possibilities allow you to check the client and his contractors in several databases in a few seconds, in addition, more and more fintech start cooperation with insurers which will provide them with additional security. I think the bigger problem and challenge here is the price at which fintech has to compete with large financial institutions and banks.
Commercial banks will become much more conservative, pulling lines especially on SMEs – I think this has already happened at the start of the pandemic. Last year especially showed that the trust that had been built over several years among entrepreneurs has simply disappeared. And this will create new business opportunities for the industry. I agree with that completely. Let us remember that factoring is a much safer product for banks and financial institutions. Specialized factors will only benefit from stricter criteria for granting traditional working capital loans and will attract many new customers. It will also be an amazing opportunity for “game challengers” like fintech. Banks that did not invest in factoring, or it was a side product for them, are also starting to notice the many advantages of this product. In my opinion, in 5 years' factoring will be a leading product in many banks, and those who use the moment to digitize and improve the procedures for granting financing in the form of factoring will only benefit from it. We must remember that customers are more and more demanding and do not want to waste time filling in long, complex requests or even leaving the house to sign a contract. Everything has to happen on-line.
Reverse Factoring users will feel the pinch. Many factors at some point began to tighten the criteria for reverse factoring which is much riskier. Will the industry ever revert to pre-pandemic reverse factoring? I sincerely doubt it. In my opinion, reverse factoring will only be for the “chosen”, and by that I mean for the clients with good financial standing, good rating, and security in the form of a mortgage. Unfortunately, these restrictions will destroy all the beauty of factoring.
The latest results of the factoring industry allow us to believe that everything returns to normal, the following months will only confirm that factoring will be more and more popular. The awareness of customers about the product is increasing and the restrictions introduced by banks regarding traditional loans will only strengthen it.
If you would like to watch the entire webinar and find out about all 10 factoring predictions, please click here: https://www.youtube.com/watch?v=l45_tGgbq28
Factoring Product Manager at Comarch