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2021

Trade Finance Market

Trade Finance Market Size, Share, Competitive Landscape and Trend Analysis Report by Product Type (Commercial Letters of Credit (LCs), Standby Letters of Credit (LCs), Guarantees, and Others), Provider (Banks, Trade Finance Houses, and Others), Application (Domestic and International), and End User (Traders, Importers, and Exporters): Global Opportunity Analysis and Industry Forecast, 2021-2030

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Author's: Monica Chhabra| Pramod Borasi | Vineet Kumar
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Trade Finance Market Outlook 2030

The global trade finance market size was valued at $44,098 million in 2020, and is projected to reach $90,212 million by 2030, registering a CAGR of 7.4% from 2021 to 2030. 

Trade finance is the financing of international trade flows, acting as an intermediary between importers and exporters to mitigate the risks involved in transactions and enhance working capital efficiency in businesses. It deals with activities related to financing of domestic and international trade. 

Trade-Finance-Market-2021-2030

Trade finance includes issuing letters of credit (LCs), receivables &invoice finance, credit agency, export finance, bank guarantees, and insurance. It is used by traders, buyers, sellers, manufactures, importers, and exporters to ease financing activities and deal with cash, credit, investments, and other assets for trade purposes. The key advantage of trade finance is that it facilitates easy way to arrange short-term finance.

Rise in need for safety & security of trading activities, surge in adoption of trade finance by SMEs in developing countries, increased competition, and new trade agreements are the major factors driving the trade finance market growth. Moreover, surge in trade wars and high implementation of cost hamper the growth of the market. Furthermore, integration of block chain technology in trade finance is expected to provide lucrative trade finance market opportunity during the forecast period.

The importers segment acquired major trade finance market share during the forecast period owing to rise in market abuse and irregularities in trading activities in the companies result in generation of massive volume of unstructured data, which drives the demand for trade finance in this sector. However, the traders segment is expected to grow at the highest rate during the trade finance market forecast period. Rise in multiple communication channels, trading technologies, regulatory compliances, and managing wealth accounts of an individual are expected to emerge as growth opportunities for traders in the trade finance market.

By region, the trade finance industry share was dominated by Asia- Pacific in 2020, and is expected to retain its position during the forecast period. The market for trade finance is expected to witness an upsurge in Asia-Pacific owing to the rise in number of new technologies and simplifying process in trade finance, and favorable government processes in the Asia-Pacific countries such as India, China, Singapore, South Korea, and Japan.

The report focuses on the growth prospects, restraints, and trends of the global trade finance market trends. The study provides Porter’s five forces analysis to understand the impact of various factors such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers on the global trade finance market outlook.

Segment Review

The trade finance market share is segmented on the basis of product type, provider, application, end user, and region. By product type, it is fragmented into commercial letters of credit, standby letters of credit, guarantees, and others. By provider, it is segregated into banks, trade finance houses, and others. By application, it is segmented into domestic and international. Based on end user, the market is classified into traders, importers, and exporters. By region, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

The key players profiled in the market report are Asian Development Bank, Bank of America Corporation, BNP Paribas S.A., Citigroup Inc., Euler Hermes Group, HSBC Holdings PLC, JPMorgan Chase & Co, Mitsubishi UFJ Financial Inc., The Royal Bank of Scotland Group plc, and Standard Chartered PLC. These players have adopted various strategies to increase their market penetration and strengthen their position in the trade finance industry.

Trade Finance Market
By Product Type
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Commercial Letters of Credit (LCs) segment accounted for the highest market share in 2020

COVID-19 Impact Analysis

With the ongoing unprecedented global health crisis, negative consequences are being witnessed in all industrial sectors and global economy. In addition, social distancing and changes in working conditions have resulted in the change in preferences of consumer toward trade finance in the market. Banking sector, like many other sectors, is facing pressure of compliance and is imposed by regulators for the adoption of trade finance competences in the phase of significant proportion of workers self-isolating at home. For instance, Bank of America is focused on trade digitization and innovation, both in-house and in partnership with fin techs. In addition, Bank of America joined the Marco Polo Network in 2019 and has continued to build its Cash Pro Trade front-end platform, which provides a range of transactions across treasury and trade along with detail on cash positions. In addition, post COVID-19, holistic trade finance approach and technology is expected to be the preferred option for various companies to fight against such pandemic situations in future and to predict the possible situations before it happens.

Top Impacting Factors

Rise in Need for Safety and Security of Trading Activities

Rise in demand for trade finance on market manipulation such as losing investor confidence, damaging market integrity, fraud behavioral patterning, and insider trading builds pressure on financial firms to invest in trade finance approaches that have less proliferation, ability to collate & monitor multiple structured & unstructured data sets together, and provide financial security in the form of payment risk &supply risk to an importer & exporter. In early days of international trade, many exporters were never sure whether, or when, the importer would pay them for their goods. Over time, exporters tried to find ways to reduce the non-payment risk from importers. On the other hand, the importers used to be worried about making prior payments for goods, since they had no guarantee of whether the seller would actually ship the goods or not. Trade finance has evolved to address all of these risks by accelerating payments to exporters, and assuring importers that all the goods ordered have been shipped with LC. Trade finance providers have increased the number of solutions to enhance the overall investor interface experience and to keep themselves ahead of their competitors in the trade finance market in the upcoming year.

Trade Finance Market
By Service Providers
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Trade Finance Houses segment is projected as one of the most lucrative segments.

Surge in Adoption of Trade Finance by SMEs in Developing Countries

Increase in investments in trade finance tools for monitoring pre trade, post trade, and examination of cross asset &cross-market trades among small number of organizations drive the trade finance market growth. In addition, various fin tech organizations have adopted trade finance system to drive their revenue growth opportunity and to improve service efficiencies, which fuel the adoption of trade finance. Globally, smaller businesses often have very limited access to loans and other forms of interim financing to cover the cost of goods they plan to buy or sell. Trade finance bridged the financial gap between importers &exporters and provided short to medium-term working capital, which provides security of the stock or service being exported or imported with supporting products or structures that allow risk mitigation.

Furthermore, trade finance mitigates the credit, payment risks or default risks that suppliers hold with banks or financial institutions and provide additional security that assures that larger orders can be fulfilled. Therefore, small businesses can trade larger volumes more easily as they work with a stronger trade credit of end customers. Hence, resolving business constraints such as detect anomalous behaviour and enable risk-based discovery due to emerging importance of trade system boosts the trade finance market growth.

Trade Finance Market
By Region
2030
Asia-pacific 
North America
Europe
LAMEA

Asia-Pacific would exhibit the highest CAGR of 10.0% during 2021-2030

Key Benefits for Stakeholders

  • This study includes the trade finance market analysis, trade finance services market trends, and future estimations to determine the imminent investment pockets.
  • The report presents information related to key drivers, restraints, and trade finance market opportunity.
  • The trade finance market size is quantitatively analyzed from 2020 to 2030 to highlight the financial competency of the industry.
  • Porter’s five forces analysis illustrates the potency of buyers & suppliers in the trade finance market.

Trade Finance Market Report Highlights

Aspects Details
Trade Finance Market By Product Type
By Product Type
  • Commercial Letters of Credit (LCs)
  • Standby Letters of Credit (LCs)
  • Guarantees
  • others
Trade Finance Market By Provider
By Provider
  • Banks
  • Trade Finance Houses
  • Others
Trade Finance Market By Application
By Application
  • Domestic
  • International
Trade Finance Market By End User
By End User
  • Traders
  • Importers
  • Exporters
Trade Finance Market By Region
By Region
  • North America  (U.S., Canada, Mexico)
  • Europe  (Germany, France, UK, Italy, Spain, Russia, Rest of Europe)
  • Asia-Pacific   (China, Japan, India, Australia, South Korea, Rest of Asia-Pacific)
  • LAMEA  (Brazil, Turkey, Saudi Arabia, South Africa, Rest of LAMEA)
Trade Finance Market By Key Market Players
By Key Market Players
  • Asian Development Bank
  • Bank of America Corporation
  • BNP Paribas S.A.
  • Citigroup Inc.
  • Euler Hermes Group
  • HSBC Holdings PLC
  • JPMorgan Chase & Co
  • Mitsubishi UFJ Financial Inc.
  • The Royal Bank of Scotland Group plc
  • Standard Chartered PLC

Analyst Review

This section provides various opinions of top-level CXOs in the global trade finance industry. In accordance to several interviews conducted, the trade finance market is expected to witness a significant growth in the market considering the launch of technologically advanced solutions to help clients streamline the trade activities ranging from purchase order to payments.

Increase in economic strength of the developing nations such as China and India are expected to provide lucrative opportunities for the market growth. Asia-Pacific hold major share in the trade finance market globally, several large enterprise organizations in this region are actively evaluating advanced trade finance solution to strengthen their technology infrastructure for overcoming from long-standing issues of high transaction and processing costs, and mitigate the huge trade finance gap.

Furthermore, technological advances such as machine learning block chain, AI, IoT, and others propel the growth of the market. Moreover, emerging countries in Asia-Pacific and Latin America are projected to offer significant growth opportunities during the forecast period. The global players focus on product development to increase their geographical presence, owing to increase in competition among local vendors, in terms of features, quality, and price.

Author Name(s) : Monica Chhabra| Pramod Borasi | Vineet Kumar

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Trade Finance Market

Global Opportunity Analysis and Industry Forecast, 2021-2030