Three Forces Redefining European Factoring

The XLVIII General Assembly of the Spanish Factoring Association (AEF) confirmed that European factoring is entering a decisive phase shaped by structural market rotation, digital risk infrastructure, and regulatory uncertainty. For institutional investors, CEOs, and CFOs, the discussions highlighted how returns and risk profiles in trade receivables finance are likely to evolve over the next cycle.

1. Spanish trade finance: resilient scale, shifting composition

Spain remains one of Europe’s most relevant factoring markets, with approximately €270bn in factoring and confirming volumes in 2025 and a 7%+ CAGR since 2018. However, growth is no longer uniform across products.
Traditional domestic factoring softened, driven mainly by strategic retrenchment at specific large institutions rather than systemic demand weakness.
Non-recourse factoring and export factoring regained momentum, reinforcing their role as credit-risk transfer tools.
Confirming® reached record levels (€142bn, +4.1% YoY) and now represents over half of total activity, increasingly functioning as payment infrastructure rather than pure financing.
For capital providers, this rotation underscores that product mix and risk selection now matter more than headline volume growth, particularly in structured and securitised strategies.

2. Inblock: reducing fraud and improving investability

A central outcome of the Assembly was the confirmation that Inblock is live and operational. Designed as an industry-wide digital registry for receivables assignments, Inblock materially reduces the risk of duplicate financing and documentation fraud.
From an institutional perspective, Inblock:

• Improves data integrity and auditability,
• Supports higher confidence in advance rates and collateral eligibility,
• Lowers operational friction across originators.
• Over time, this infrastructure is expected to compress risk premiums for compliant operators and accelerate the institutionalisation of trade receivables as a scalable asset class.

3. VAT risk: a potential inflection point for factoring economics

The most sensitive topic was the potential reclassification of factoring discounts for VAT purposes, following the Kosmiro case. If European regulators were to require VAT to be charged on discount income:

• Net yields would compress unless costs are passed through,
• SME affordability and product competitiveness would weaken,
• Structuring complexity would increase, especially cross-border.
• For investors and CFOs, VAT treatment has moved from a technical footnote to a material regulatory risk that must be monitored and priced into long-term strategies.

Strategic takeaway

The message from Seville was clear: factoring remains a core component of European working-capital finance, but its future belongs to operators combining regulatory foresight, digital infrastructure, and disciplined structuring. Those able to keep the complex simple will be best positioned to deliver resilient returns.

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