According to a recent report published by Allied Market Research, titled, “Letter of Credit Confirmation Market by L/C Type and End User: Global Opportunity Analysis and Industry Forecast, 2021-2030,” the global letter of credit confirmation market size was valued at $3.91 billion in 2020, and is projected to reach $5.09 billion by 2031, growing at a CAGR of 2.72% from 2021 to 2030.
A letter of credit confirmation is a process of document verifications and validating proof of export against the letter of credit requirements, which is conducted by confirming banks. These banks add its confirmation to a credit upon the issuing bank’s request. In addition, if the buyer is unable to make payment on the purchase, the seller makes a demand on issuing bank for the payment. Furthermore, rise in demand for customized trade finance solutions globally and regulatory support in growth of strict regulations for secured LCC services is some of major factors drives the letter of credit confirmation market growth.
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In addition, due to increased global trade and to avoid risk of payments, the importers and exporters are largely implementing protection for their trade documents via letter of credit confirmation services.
However, due to an involvement of several intermediaries between the issuer and beneficiary banks globally, the online letter of credit confirmation procedure are prone to fraudulent and cyber-attacks such as loss of huge trade amounts and confidential data leakages. This, as a result, becoming major restraining factors in the letter of credit confirmation market.
Conversely, increase in business operations and global trading among small & medium enterprises, and large companies are providing lucrative opportunities for confirming banks to expand their business in letter of credit confirmation services in the market. Moreover, increased technologies such as distributed ledger technology (DLT) and blockchain is expected to provide lucrative opportunities in terms of creating real-time digitalized letter of credit contract, auto notifications alert over trades, and enhance business efficiency in the market.
On the basis of L/C type, the sight L/C segment dominated the letter of credit confirmation industry in 2020 and is projected to maintain its dominance during the forecast period. Sight payment methods are largely used by traders due to it instant and timely payment features in the market. Furthermore, under sight payments, the seller receives the payment quickly after shipping the goods, thus fueling the market growth and are expected to grow at a significant CAGR during the forecast period.
The large enterprises segment dominated the letter of credit confirmation market share in 2020 and is projected to maintain its dominance during the forecast period, Due to large firms from several industries such as healthcare, media & technology companies, power & utilities industries, and others have been the major adopters of letter of credit services in the recent years. The large companies in these industries trade at a large scale and generate higher revenue in their businesses. Thus, the confirming banks & issuing banks are expected to offer lucrative opportunities in terms of development of products & services and provide customized offerings under this segment.
By region, the global letter of credit confirmation market share was dominated by Asia-Pacific in 2020 and is expected to maintain this trend during the forecast period. Due to the confirming banks and issuing banks continue to seek growth and are focused on further development in trade finance services in the region. Moreover, due to emerging economies and changing regulatory environment, traders are expanding their businesses, thereby becoming major growth factors for the letter of credit confirmation market. As the traders in the region still depend on letters of credit services and are expected to maintain its dominance during the forecast period.
Due to increased uncertainty in global trade, there were shifts in supply chain demands, and business closures across several industry verticals, the COVID-19 pandemic has had a negative impact on the letter of credit confirmation market trends. Furthermore, in order to stop the virus from spreading, numerous government authorities in various nations had enacted strict trade restrictions, resulting in geopolitical tensions and a rapid shift in trade patterns. As a result, amid the global health crisis, demand for letter of credit confirmation products has decreased significantly.
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Key Findings Of The Study
- By L/C type, the sight L/C segment led the letter of credit confirmation market size in terms of revenue in 2020.
- By end user, the large enterprises segmented accounted for the highest letter of credit confirmation market share in 2020.
- By region, Asia-Pacific generated the highest revenue in 2020.
The key players profiled in the letter of credit confirmation market analysis are Bank of America Corporation, Citigroup, Inc., DBS Bank Ltd, JP Morgan Chase & Co., Mizuho Bank, Ltd., MUFG Bank, Scotiabank, Standard Chartered, Sumitomo Mitsui Banking Corporation, and The PNC Financial Services Group, Inc. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry
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