Is Factoring a Casualty of Fintech?

Several years ago, I gave an address at an International Factoring Association (IFA) Canada conference. One of the topics we covered during my talk was whether invoice factoring was falling behind fintech solutions in customer preference. It’s a crucial question, seeing as how fintech is among the buzzwords used to identify the marrying of financing and technology in all its shapes and sizes. With that said, is factoring becoming a casualty of fintech?

The need for factoring

Factoring is an alternative to traditional business loans, as it allows a company to sell its accounts receivable to a third party at a discount of the total invoice amount. This kind of B2B financing offers numerous advantages, particularly for small enterprises that may not qualify for large bank loans or mid-size companies that want a more streamlined financing option tied to the money they already know is coming in. Factoring equals liquidity. Suppliers have come to rely on these third-party solutions to help them do everything from paying employees to buying materials for an upcoming order.

Although factoring has been around for a while, it faces some competition from other sources of business financing, including fintech. Fintech, or financial technology, is considered the upstart in the commercial finance space. The term is often used as a catch-all to financing solutions associated with some form of technology and alternative funding source. While fintech sometimes leverages the same type of funding other solutions offer, it’s the technology and the flexibility that results that sets it apart from other options.

What fintech does well

Fintech’s use of technology, including blockchain, artificial intelligence (AI), big data, and robotic process automation (RPA), makes it ideal for those who prefer to transact business using smartphones or other mobile devices. Furthermore, fintech solutions facilitate online transactions for e-commerce companies when it comes to invoicing and payment.

One could argue that fintech companies use technology to facilitate traditional financial transactions. While this is not untrue, fintech also provides attractive alternatives around invoicing and payment.

Take Billd, a fintech disrupting the construction industry. The company’s value proposition is that they pay suppliers upfront, and contractors pay Billd afterward. This approach allows suppliers to obtain necessary materials to begin projects right away without contractors coming out of pocket.

Ripple is another fintech that offers solutions that benefit businesses of all sizes. Ripple leverages blockchain and facilitates cross-border payments instantaneously, providing a streamlined method of transacting for many multinational companies.

In essence, fintech solutions handle many of the same financial transactions historically the domain of traditional financial institutions such as banks and credit unions. The primary differences are the technology component that allows for more flexibility regarding how or when entities are paid and the funding source, including investors and cryptocurrency.

Is factoring and fintech at odds?

With the variances outlined above, it’s clear that there are specific differences between factoring and fintech solutions. But must they be at odds? One of the possible solutions I mentioned during the IFA Canada conference was the need for factoring companies to embrace all forms of technology to compete effectively against emerging fintech solutions. While challenging, there is simplicity in this approach when we consider that suppliers want two things regarding financing options: speed and low interest rates.


Suppliers want to finance a portion of their operation quickly and easily by leveraging receivables when necessary. They don’t want to wait days for approval, and the sooner they can deploy funding, the better their operation will be. Speed has a ripple effect throughout the entire supply chain. The longer it takes for supplier A to provide products to supplier B, the longer it will take for customers to deliver products and services to the end-user.

Interest rates

Speed is vital to suppliers when it comes to financing decisions, but so are low interest rates. When suppliers can quickly compare rates and terms from several different lenders, they gain the power to choose the best option for their business. This is not to say that suppliers will always choose the lowest interest rate. If a supplier can get same-day funding, they may select a solution whose rates are higher than a solution that requires several days for approval.


Factoring doesn’t have to be a casualty of fintech. Rather than be at odds, factoring companies can join fintech by leveraging many of the same technologies their counterparts do. There is no reason why factors cannot use AI, RPA, and big data to be as competitive as fintech solutions in specific segments. In fact, companies like BlueVine are doing just that. BlueVine uses industry-leading technology to offer B2B financing products, including factoring, that are facilitated digitally. In addition, BlueVine has done an excellent job marketing its services, targeting those companies historically the domain of traditional factors.

Many factoring companies pride themselves on customer relationships. Relationships are critical, but fintech solutions play a numbers game, offering solutions to a wide variety of businesses with great technology but little person-to-person interaction. Factors can do both: develop great relationships and leverage technology. These things are not mutually exclusive.  Factors that do this will run stride for stride with fintech, while those that don’t will likely struggle.

Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He previously chaired the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.