Amid economic uncertainty and declining exports, rising credit risk has brought in more corporate account receivable refinancing business and higher demand for factoring services at local banks, an executive of HSBC PLC (匯豐銀行) said yesterday.
Last year, factoring services in Taiwan grew to 48 billion euros (US$66.8 billion), or an averaged annual growth of 39.6 percent since 2002, while factoring business in China grew to 55 billion euros from 200 million euros in 2002, HSBC said.
“We expect factoring businesses in both Taiwan and China will continue to see growth this year on companies’ rising demand for risk management and on cost-cutting efforts,” said Mike Ko, (柯鴻展) senior vice president of the receivable finance division at HSBC.
HSBC has taken the largest market share in the segment in Taiwan with 20 percent.
Factoring is a financial transaction whereby a business sells its accounts receivable — that is its unpaid invoices — to a third party, usually a bank — the factor — at a discount in exchange for immediate cash.
HSBC plans to expand its business and revenues in the factoring segment this year by tapping into supply chain manufacturers of its existing clients worldwide, for example, local manufacturers that do businesses with Wal-Mart Stores Inc, Ko said.
Factors Chain International (FCI) data shows that HSBC managed factoring business of 358 million euros, or 13,209 invoices, last year, outperforming Mega International Commercial Bank’s (兆豐國際商銀) 236.5 million euros, or 8,818 invoices, and Taipei Fubon Bank’s (台北富邦銀行) 213.4 million euros, or 14,085 invoices.
The financial crisis, however, has taken its toll and increased defaults on account receivables. FCI’s data showed that the payments under guarantee rate in Taiwan rose to 0.1 percent last year from zero in 2007, compared with a global rate of 0.14 percent.