Switching Between Invoice Finance Providers
During my recent briefing of he ABFA (Asset Based Finance Association) I was asked if we had any insight into switching between invoice finance providers and indeed if users were switching to or from bank-owned providers or independents.
To answer the question, I have looked back at the study of invoice finance users that we completed in March 2014.
For the purposes of this article, I have defined "bank-owned invoice finance companies" as those owned by high street banks.
Switching Invoice Finance Companies
In total, we spoke to 100 existing invoice finance clients and we found that all of them had switched providers at some stage:
- 89% had switched once.
- 8% had switched twice.
- 4% had switched three times.
So, as previously concluded, the majority of invoice finance users appear to switch providers during their client life (2.14 providers used on average), and the biggest driver of moving providers was to make cost savings (which accounted for 42.4% of the reasons given.
Which Invoice Finance Companies Do Clients Move To
We asked them who they were using now, after switching i.e. who they had moved to:
- 38% had moved to bank-owned invoice financiers.
- 62% had moved to independent invoice financiers.
Therefore the majority had moved to an independent.
Of the 38% that were now using a bank-owned provider:
- 58% had previously used a bank-owned provider.
- 42% had previously used an independent provider.
Of the 62% that were now using an independent provider:
- 37% had previously used a bank-owned provider (at some stage).
- 63% had previously used an independent provider (at some stage).
Product Variations
Looking at just those using invoice discounting (54%) there were 57% now using a bank-owned provider and 43% using an independent.
Of those using factoring (46%), there were 15% used a bank-owned provider and 85% used an independent. This indicates a marked preference for a move to the independent sector, among factoring users.
Conclusions
The majority of invoice finance users appear to move once during their time using these products. The primary driver of that move is to make cost savings, however, there were other reasons given for moving including changing banks, improving service, seeking more flexibility and more personal service.
When they change providers, the majority (62%) move to an independent provider.
There appears to be a particular preference, among factoring users, for independent invoice finance companies.
Source: Invoice Finance Clients Survey March 2014 (100 Respondents All Existing Invoice Finance Users)
