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. Moreover, the services in trade finance as a strategic tool help to deal with activities related to financing of domestic and international trade.
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 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 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 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.
By Product Type
Commercial Letters of Credit (LCs) segment accounted for the highest market share in 2020
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 in trade finance operations, 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 market in the upcoming year.
By Service Providers
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 in trade finance transactions drives the 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 market growth.
Report Coverage & Deliverables
Instrument Type Insights
In terms of instrument type, the letter of credit segment dominated the market in 2022 with the largest revenue share. The letter of credit segment has historically dominated the market due to its role in providing a secure and trusted mechanism for international trade transactions. Letters of credit act as a financial guarantee, assuring both the buyer and the seller that the terms of the trade will be met in the digitalization of trade finance. Trade finance offers risk mitigation solutions of non-payment for sellers and ensures the delivery of goods for buyers.
Service Provider Insights
In terms of service provider, the banks segment dominated the market in 2022 with a revenue share. They possess extensive networks and established relationships with businesses worldwide, making them trusted intermediaries in international trade transactions. This trust is particularly crucial in cross-border deals, where assurance of payment and delivery is paramount which increases the demand for trade finance services. Moreover, banks offer a wide range of trade finance products and services, including letters of credit, trade loans, and documentary collections. This diversity allows them to cater to the diverse needs of various businesses engaged in global trade.
Trade Type Insights
In terms of trade type, the international segment dominated the market in 2022 with a revenue. International trade finance has dominated the market due to the inherently global nature of trade transactions. This type of trade finance specializes in facilitating cross-border trade by providing financing solutions that bridge gaps in time, distance, and currency. One key reason for its dominance is the scale of international trade , which involves large volumes of goods and services moving between countries.
Enterprise Size Insights
In terms of enterprise size, the large enterprises segment dominated the market in 2022 with a revenue share. Large corporations often engage in extensive international trade operations involving complex supply chains, numerous suppliers, and global customer bases. Managing these intricate networks requires substantial financial resources and sophisticated trade finance solutions to ensure smooth transactions and minimize risks. Moreover, established large enterprises typically have well-established relationships with financial institutions, granting them access to a wide range of trade finance services, including letters of credit, trade credit insurance, and supply chain financing in the trade finance market.
Industry Insights
In terms of industry, the construction segment dominated the market in 2022. Due to its unique characteristics and substantial financial needs, the construction industry has established a dominant presence in the market. Construction projects often involve complex, cross-border supply chains that require extensive financing for the procurement of raw materials, heavy machinery, and skilled labor. These projects also tend to be long-term endeavors, further necessitating the availability of trade finance solutions to sustain operations over extended periods.
End-user Insights
In terms of end-user, the importer segment dominated the market in 2022. The importer segment has historically dominated the market due to its crucial role in international trade activities. Importers are often the key initiators of trade transactions, offering trade finance products, sourcing goods and raw materials from various countries to meet domestic demand. To facilitate these transactions, importers require financial instruments that provide security to their suppliers, ensure the timely delivery of goods, and manage currency fluctuations and payment risks. Import financing tools such as letters of credit, open account financing, and trade credit insurance are essential in this context.
Regional Insights
In terms of region, North America dominated the market in 2022. The region comprises some of the world's largest and most influential financial institutions, including major banks and financial hubs like New York City. These institutions have a global presence and extensive networks, allowing them to offer a wide range of trade finance services to businesses engaged in international trade. Moreover, North America has a robust and diverse economy with a significant focus on international trade. The U.S. is one of the world's largest importers and exporters of goods and services. This high level of trade activity naturally drives the demand for trade finance solutions to support the complex financial transactions associated with cross-border trade.
By Region
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
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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.
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