FCI was set up in 1968 as a non-profit association and industry body for the independent factoring companies around the world.
When FCI started, domestic factoring was only available in North America and a few European countries. The world merchandise exports totaled less than USD 500 billion annually and besides in the US, factoring volumes were essentially non-existent. During this critical period in the 1960s in Europe, the building blocks would be laid for the creation of a global Factoring Industry! The first phase of FCI’s development was all about creating the proper legal infrastructure and promotion of the industry. The concept of cross-border factoring was still new and restricted by its lack of geographic reach. Recognising the potential for international factoring, the founding FCI members realised a non-profit association and industry body was needed, firstly to introduce factoring in countries where it was not yet available, and secondly to develop a framework for international factoring that would allow factoring companies in the country of the exporter and the importer to work closely together.
Hence, FCI’s mandate was to promote the development of factoring around the world, develop standardized factoring techniques and best practices for cross border business and help solve the legal, regulatory and technical issues arising in receivables purchase transactions. As a result of the many investments FCI and its members have made over the years, factoring grew from originally 15 members operating in 12 countries.
The second phase of growth for FCI started in the mid 1970s. Jeroen Kohnstamm had been hired as the Secretary General in 1972, and began to promote factoring, planting seeds around the world, including in East Asia, Latin America, Eastern Europe and the two largest and most populated markets, China and India. The volume during this period from 1972 to 1997 grew from less than EUR 10 Billion to approximately EUR 600 Billion by 1997, and FCI’s membership would grow from 25 members to over 140 members operating in 40+ countries during this 25-year period. The organization developed the Code for International Factoring Customs and the FACT System, a pre-internet telex based messaging system to support the growth of cross border factoring between members. And FCI also began the development of a robust education platform, that would assist in educating thousands of students on factoring and receivables finance .
The third phase started with the Asian flu, a financial crisis that was centered in Southeast Asia but had spread to other parts of the region. Asia at the time only accounted for less than 3% of global factoring volumes. The start of the new millennium was also a significant turning point for FCI. The period of the late 1990s will be known as the beginning of the revolution on global open account trade and the rise of the emerging markets, led by a dominant China. By 1997, FCI had about 140 members, but by 2017, FCI would increase to nearly 400 members. The Industry was generating approximately EUR 600 billion in volume. By 2017, the industry would generate over EUR 2.5 trillion in volume, a nearly 8% Compounded Annual Growth Rate (CAGR) increase during this 20‑year period. The phenomenal rise in factoring was brought on by 1) the rapid expansion of business in Asia, led by China; 2) the significant growth in cross‑border factoring (from less than 5% of total volume in 1997 to over 22% in 2017), and 3) the rapid expansion of factoring in Europe, driven by a transition in business from banks to mainly factoring subsidiaries of banks. This was in part due to the global recession in 2008-2009, which witnessed a shift to more safe and secure forms of financing, including the favorable capital treatment that BASEL afforded commercial banks investing in receivables finance and factoring services.
The fourth phase is the one we are in now. As a result of the fantastic growth of the industry over the past two decades, the seeds were sewn for the union between the two largest global factoring associations, International Factors Group (IFG) and FCI. Both councils approved the merger and on 1st January 2016, the two organizations became one, under the banner of FCI, but bringing in the DNA and best of both worlds, to form the largest non-profit association dedicated to the growth and interests of the open account receivables finance industry today. The combination allowed FCI strengthen the framework, increase the number of members, and add many new markets. But it especially allowed FCI to commit more resources to advocacy, by raising the awareness of the many benefits that factoring affords, especially from the perspective of regulators and policy makers, that the industry represents the safest and most secure means of financing trade today, with a very low historical default rate and an industry that caters to the financing of small to medium enterprises (SMEs). FCI’s aim is to translate this reality into capital reduction benefits for the industry and to cut through the red tape that some regulations and their unintended consequences have on our industry.