Post-pandemic factoring 2026: new strategies and Embedded Finance

The 2020–21 pandemic served as a stress test for the entire financing market. Traditional factoring, based on paper reports and manual document verification, proved unprepared for rapid changes in the economy.

When lockdowns halted economic activity, many companies lost revenue and began delaying payments to suppliers. According to a study by Black Knight, the U.S. mortgage delinquency rate rose from 3.06% in March 2020 to 6.45% in April. 3.6 million homeowners were not paying their mortgages — a record since January 2015.

On average, companies began paying 50 days later than agreed terms. This created a domino effect: one missed payment triggered another, and a cascade of defaults rippled through the entire supply chain. A study by the Bank of France showed that an increase in the net trade credit position by one standard deviation raised a company's default probability during lockdown by 10%, and in retail — up to 30%.

For factoring, this meant that old scoring models based on quarterly reports ceased to work. Banks and factors found themselves in a situation where it was impossible to determine which debtors were able to pay and which were not.

The market confirms the effectiveness of the new model. Factoring companies using modern cloud platforms with open APIs can process 60,000 invoices per month. Such data is contained in the analytics of factoring software provider FactorCloud.

Post-pandemic strategies take into account that reliance on manual work and retrospective data in a rapidly changing environment is a path to collapse.

From retrospective to predictive API underwriting

Traditionally, factoring companies relied on quarterly reports and documents from past periods. But in today's world, the economy changes too quickly: a debtor's solvency can collapse in a matter of weeks, not a quarter. Waiting three months to find out that a buyer has stopped paying is an unaffordable luxury.

At the same time, the global Days Sales Outstanding (DSO) indicator increased by two days in 2025, reflecting an overall lengthening of payment terms worldwide. This means that companies on average are waiting longer for money, and traditional assessment methods are becoming increasingly irrelevant.

As noted by Indian fintech company Vayana, using transactional data and AI makes it possible to assess "thin" credit profiles that lack extensive history — for example, small and medium-sized enterprises in developing countries. As a result, financing decisions are made within minutes.

Example: Singapore's DBS Bank uses AI to assess supplier solvency up to 3–4 levels deep in the supply chain, forecasting SME capital needs even before an application is submitted. This has allowed the bank to increase the number of SME clients served without expanding its risk management staff.

The adoption of API integration and automated scoring also reduces defaults among new clients by 10–20% and cuts underwriting time from several days to 4–6 hours, making the process faster and more reliable.

Embedded Finance: factoring as a built-in function

In the traditional model, to receive money against an invoice, a supplier had to contact a bank, fill out an application, and wait for a decision. This involved significant time costs. In the new model, a "Get early payment" button is embedded directly into the invoice within the accounting system or on the trading platform. The client does not need to switch between windows and wait for a decision — financing occurs where the need arises.

This changes supplier behavior: according to IBM data, 83% of them are willing to use embedded financing on e-commerce platforms, and 74% of global companies plan to implement embedded financial solutions within the next 5–10 years.

An important nuance: the rate at which the supplier receives money is no longer fixed for a year. Algorithms recalculate it daily using dynamic discounting.

As a result, the supplier receives an individual rate that reflects their real situation, rather than the bank's average tariff. This allows banks and factors to manage risks more precisely, and suppliers to save on financing if they are reliable.

According to a 2025 study by PYMNTS Intelligence and Green Dot, more than 80% of companies expect embedded finance to become the primary way of obtaining business capital in the coming years. Financing ceases to be a separate service and becomes part of a company's daily operations.

Democratization of liquidity and closing the SME gap

A few years ago, small and medium-sized enterprises (SMEs) had virtually no access to factoring. The reason was that checking a single client cost the bank more than the potential profit from their small invoices. Factors would not take on such deals.

As a result, small and medium-sized businesses in developing countries faced a huge financing deficit. According to IFC estimates, the total financing gap for formal SMEs amounts to $5.7 trillion per year. In Africa alone, according to the African Development Bank, the annual deficit exceeds $330 billion, and in Chad this gap reaches $1.5 billion — over 14% of the country's GDP.

This means that millions of companies that create jobs and drive the economy cannot access money.

Automation has changed this economics. Digital identification (e-KYC), electronic signatures, and automatic invoice verification through tax databases (oracles) have reduced the cost of processing a single transaction to a level where factoring for SMEs became profitable even for invoices worth a few hundred dollars.

The TReDS platform in India, where the government created a unified system for trading invoices, attracted over 10,500 SME participants, 342 buyers, and 19 banks within a few years of launch, proving that automation and scale solve the problem of small business access to money.

As a result, we are witnessing how technology has closed the SME Financing Gap — the historical funding deficit that had been "choking" small and medium-sized businesses for decades.

Conclusions for CFOs: factoring as an element of operational resilience (Executive Summary)

In 2026, factoring has ceased to be an expensive loan for emergency cash flow gaps. It has become a tool for strategic supply chain management.

Factoring platforms are becoming a source of free analytics about counterparties. Data on the payment discipline of thousands of debtors allows companies to see which buyers are starting to delay payments before the problem becomes critical. This enables predictive analytics to prevent cash flow shortfalls.

Today, the factoring market shows steady growth. According to Research and Markets, in 2026 the global market volume will reach $7 trillion, and by 2035 growth to $12.5 trillion is projected.

Technologies such as digital onboarding (e-KYC, automatic verification) and dynamic pricing allow banks to assess risks more accurately. This makes factoring more accessible for reliable companies and more difficult for those that cannot confirm their stability. As a result, the system becomes more resilient.

Supply Chain Finance is no longer a niche product for large corporations but becomes part of the broader ecosystem. Access to money depends on the transparency and reliability of the entire supply chain, not just the individual borrower.

FAQ: Frequently Asked Questions

How is the problem of cybersecurity and data leakage addressed with direct API integration of the factor into the client's corporate ERP system?

A Zero Trust architecture and granular data access control are used. API integration assumes the minimum necessary data volume for scoring — the factor receives access only to anonymized transactional data, not to the client's full ERP system. All channels are encrypted, and access is regulated via OAuth tokens with limited validity periods.

Does recourse factoring remain relevant in the context of algorithmic scoring and the shift to platform-based models?

Yes, recourse factoring remains relevant as a cheaper option for suppliers with reliable debtors. However, its share is declining: in 2026, non-recourse factoring accounts for more than 80% of the portfolio at leading platforms due to the accuracy of algorithmic scoring, which allows factors to confidently take on debtor credit risk.

How does the integration of factoring into marketplaces affect the legal formalization of the assignment of receivables (cession)?

Integration into marketplaces assumes automatic execution of cession at the time of invoice generation. The terms of receivables assignment are specified in the marketplace offer, and the supplier agrees to them upon registration on the platform. This eliminates the need for separate negotiation for each invoice, reducing the time between shipment and financing to several hours.