Every June, FCI publishes its Annual Review, giving an overview of progress made by the world's most extensive and important factoring network. The Annual Review presents FCI's annual figures and global factoring statistics. In this extract from the FCI Annual Review 2024, we explore the Americas Regional Updates, presented by Mr Alberto Wyderka, FCI Regional Manager Americas.
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2023 Figures
In 2023, the Americas Region represented 6% of global factoring volume. South and Central America saw an increase of 4.3% to EUR 129 billion. North America decreased by 10.7% to EUR 92.8 billion. The region’s total domestic factoring volume reached EUR 222 billion, while international factoring exceeded EUR 11 billion. Two-Factor System international factoring dropped by EUR 0.7 billion from EUR 5.8 billion in 2022 to EUR 5.1 billion in 2023, representing 20.5% of total volume. This decrease occurred in the volume of imports factoring in North America. Latin America & Caribbean (LA&C) maintained almost the same volume as last year, with exports outweighing imports. Growth in 2022 marked the first time the LA&C sub-region surpassed the billion-euro threshold, which was happily confirmed. Overall, the region experienced positive growth, which is very encouraging.
Legal, Regulatory and Advocacy
The UNIDROIT Factoring Model Law (FML), recently concluded and in which FCI had crucial participation in its drafting, was distributed to members and associations of the region for them to review it, have their opinions and compare it with the country's factoring law, (if it exists), and improve it if deemed necessary, and for countries that do not have a factoring law, let the FML serve as inspiration. During the year, I held meetings with regulators, especially from countries where factoring is very important, and there is positive concern about the growth they are observing. These advocacy actions are essential to expand the markets in which we are present and promote new financial instruments in some countries. In this way, we help to adapt regulatory frameworks, disseminate good practices and correct financial principles of this business, with a special focus on the solution for cross-border operations, especially using our model.
Promotion and Awareness
There was important labour with Associations, with presentations at FELAFAC (the Latin American Factoring Federation), where we are members. I participated, like every year, in FELABAN, the best event in the region to discover new potential members – I also met Multilateral Organisations (IDB Invest and some Regulators), to promote the financing of national and cross-border accounts receivable, especially the Two-Factor System (2FS), and to strengthen FCI’s brand awareness – always fulfilling FCI’s mission: to be the voice of the industry and promote the growth of our community. I also participated in the IFA Congress in New Orleans, and from there, I visited members of the USA. Education is and will be a high priority in the region. Virtual and face-to-face tailor-made training was given to some banks on the mechanics of our 2FS solution, risks, and legal and commercial training.
Membership Mobilisation
Three new members joined our community during 2023, one in México (INTERCAM Banco) as an Associate Member, two in the USA (Standard Chartered Bank NY Branch and TCLG Inc.), one as an Associate Member and the other one as a Partner Member. I always like to highlight that 86% of our members are Associate members and 25% of them are Full members. Three are Affiliate members, three are Sponsors, and one is a Partner. All of them form a networking structure that also partly explains the growth of 2FS volumes in the region.
Challenges
One of the main challenges in LA&C is achieving greater activation of FCI’s 2FS model, which strengthens members’ sense of belonging. FCI cooperates with members by linking them, establishing connectivity, developing the correspondent concept, providing training, and organising meetings with clients and associations. If members are unwilling to provide Import Factor (IF) services and take risks, implementing the 2FS model will be challenging. In North America, members offer excellent IF services. The challenge is to show LA&C members the business potential of becoming an IF, which can generate income and open opportunities for other businesses while respecting their risk standards and policies. Banco Chile, BanColombia, and Exicon stand out as IFs in LA&C. Several others generate volumes that could be larger. The challenge is to help them grow, take more risks, and attract those undecided about import factoring. Improving legal and regulatory frameworks for adequate factoring treatment remains a challenge. UNCITRAL’s Factoring Model Law can inspire current factoring laws or the design of new ones. FCI and national Factoring Associations have a role in these issues. The speed and quality of communication services between correspondents should improve and increase in other regions. Education and appreciation of this issue by members is another challenge, particularly convincing them it is an investment rather than an expense.
Outlook 2024
Challenges are a constant, much like political changes and uncertainties. However, the outlook for the accounts receivable financing industry remains positive and promising. Regional trade is growing, and accounts receivable will continue to expand, attracting banks and factoring companies. In 2023, volumes grew again, and we expect this trend to continue in 2024. In early 2025, FCI will host an event in Miami on SCF, Factoring, and 2FS, focusing on legal aspects, in collaboration with IDB Invest and FIBA. Find out more about this event here.
- FIBA: We aim to collaborate in various fields, prioritising education and exploring other joint events. UPDATE: FCI & FIBA have signed an MOU to establish a framework for collaboration to enhance the Accounts Receivable Finance industry across North, Central, and South America and the Caribbean.
- IDB Invest: We aim to strengthen ties with IDB, which is similar to our work with EBRD and Afreximbank.
We are optimistic about the growth and consolidation of open account financing, factoring, and especially our flagship 2FS model, thanks to our dedicated current and future members.
(Photo: © Richard Sharrocks)