Financial Guarantee Market Expected to Reach $71.93 Billion by 2030

According to a recent report published by Allied Market Research, titled, “Financial Guarantee Market by Product Type, Enterprise Size, and End User: Global Opportunity Analysis and Industry Forecast, 2021-2030,”  

The global financial guarantee market was valued at $28.70 billion in 2020, and is projected to reach $71.93 billion by 2030, growing at a CAGR of 9.6% from 2021 to 2030.

Financial guarantees are generally offered in the form of bonds that are sanctioned by an insurer or a financial firm to guarantee the lender at the corporate level. In a move to attract investors, many insurance firms have come up with tailored financial products that can be used by debt issuers. This will guarantee the investors/lenders that both the interest and the principal components are repaid by the borrowers.

Financial guarantee helps the businesses to recover the loss owing to deferred payments from debtors. In addition, financial guarantee reduces the risk and mistrust between seller and consumer by acting as an assurer. This is a key factors that boost the growth of the global financial guarantee market. However, when a customer contacts a bank for a bank guarantee, the bank further evaluates the customer's creditworthiness as well as financial health. Before issuing a guarantee, the bank conducts a thorough financial investigation of the applicant. This procedure can become rather difficult at times, resulting in either no guarantee or significant delays in obtaining a guarantee. Conversely, the digitalization of various processes to obtain financial guarantee is driving the growth of the market. The automation of document verification and credibility checking procedures have increased the efficiency of the banks and is expected to create an immense opportunity for the market in the coming years.

On the basis of end user, the importers segment dominated the financial guarantee market in 2020, and is projected to maintain its dominance during the forecast period. This is attributed to the fact that importers are increasingly engaging into massive trades by importing bulk of goods from different countries, which involve complex transactions. Therefore, demand for financial bank guarantee among importers continue to rise and becoming major financial guarantee market trends.

By region, the global financial guarantee market is being dominated by Asia-Pacific in 2021, and is expected to maintain this trend during the forecast period. Major factors that contribute towards financial guarantee market growth in Asia-Pacific include the process of digitalized financial guarantee with the help of various technologies such as optical character recognition (OCR), machine learning automation, and distributed ledger, blockchain. In addition, technological advancement in the field of financing has given rise to new business practices and these forces have changed the financial services industry.   

The financial guarantee industry has been severely affected, due to sudden business shutdown. In addition, traders have changed their preferences of availing financial guarantee products particularly for metals such as aluminum and nickel, due to the impact on industries such as automotive and aviation, respectively. Moreover, consequent lockdown has disrupted supply chains, which, in turn, has resulted in a situation wherein buyers failed to pay dues to manufactures. As a result, these major factors affected the financial guarantee market growth during the pandemic situation.

Key findings of the study

• By product type, the documentary letter of credit segment led the financial guarantee industry, in terms of revenue in 2020.
• Depending on enterprise size, the large enterprises segment garnered the highest financial guarantee market share in 2020.
• By region, Asia-Pacific generated the highest revenue in financial guarantee market size.

The key players profiled in the financial guarantee market analysis are Asian Development Bank, BNP Paribas, Barclays, Bank of Montreal, Citibank, HSBC, ICBC, National Bank of Canada, SINOSURE and Scotia Bank. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.