In Part 1, I argued that the United States will never build a national receivables registry. The economy is too decentralized, state-level rules diverge, and buyers use thousands of incompatible vendor management systems. I argued that Kapwork's approach, verifying invoices directly within buyers' systems of record, solves the infrastructure problem without requiring the registry that will never come.
But I glossed over something that deserves its own examination: why receivables finance tolerates self-attested data in the first place. Try to get a mortgage without an independent appraisal. Try to finance a car without a title check against the state database. You cannot. These markets solved their verification problems decades ago. Receivables finance, somehow, has not.
The standard practice in factoring and asset-based lending has remained unchanged since the 1970s: the seller provides the invoices, the funder reviews the documents, and the funder may contact the debtor to confirm. Maybe. Industry guidance from major factors explicitly notes that email verification with account debtors "is not typical and may potentially add risk to the transaction." The very act of confirming an invoice's existence is treated as an exceptional step.
Receivables are among the safest financial assets. The ICC Trade Register, covering $25.7 trillion in transactions across 22 major banks, shows trade finance default rates at one-fifth the level of comparable default rates for Moody's corporate credits. Export letters of credit default at 0.01%. The European Union Federation reported in 2016 that factoring impairment losses are three to four times lower than those in bank lending.
So then, why does the market treat them with suspicion? The reason is infrastructure.
What other markets learned
Before the Depository Trust Company centralized equity settlement in 1973, trading volume of just 15 million shares per day overwhelmed paper-based systems. The NYSE closed every Wednesday for months to let clerks catch up. Settlement stretched to five days and was still not met reliably. One-third of investors experienced the loss or late delivery of securities. Organized crime syndicates stole $400 million ($2.8 billion today) in securities by exploiting the transport of paper certificates through lower Manhattan.
The transformation to book-entry settlement now processes $3.8 quadrillion annually. Settlement has been compressed from T+5 to T+1 since 2024. The infrastructure made the asset class safe not by changing the asset but by verifying ownership.
Auto lending is connected to the National Motor Vehicle Title Information System. Before NMVTIS, "washed titles" allowed damaged vehicles to be re-titled in states without brand history, creating opportunities for fraud that the infrastructure eliminated. DMV clerks now identify stolen vehicles while suspects are still standing in their offices. The system covers 49 states plus DC with instant title verification, brand history tracking, and real-time stolen vehicle checks.
What happens without verification
Greensill Capital - in administration collapsed in 2021 after German regulator BaFin found the company "was unable to provide evidence receivables" on its balance sheet. Greensill had financed invoices "where the sale or the client did not exist." Grant Thornton administrators contacted purported customers who stated they had no business with Greensill's counterparty. Credit Suisse froze $10 billion in supply chain finance funds.
First Brands Group may prove larger. Court filings from September 2025 allege that the company created $2.3 billion in factoring liabilities arising from forged or non-existent invoices, with values inflated by 10 or more. One package allegedly changed from $2.3 million actual value to $11.2 million. Another $2.3 billion came from double-pledging inventory to multiple lenders. The alleged fraud continued for seven years. Total outstanding debts exceed $11 billion.
These are not failures of receivables as an asset class. Receivables performed fine. Verification failed. The funders accepted self-attested data, conducted spot checks, and trusted the wrong people. A system that required debtor verification would have caught fabricated invoices immediately. A registry that tracked pledges would have caught double-pledging. Neither existed.
Receivables should be predictable
The performance data on trade receivables is remarkable for its consistency. Default rates of 0.01 to 0.06%. Loss given default under 1% for most products. Crisis performance that held steady through both 2008 and COVID-19. The ICC Secretary General observed in 2023: "We have been waiting to see whether the trade finance market finally shows signs of weakness... this seems simply not to be the case."
These characteristics stem from structure. Receivables are self-liquidating, converting to cash as underlying transactions settle. They are short-duration, with average tenors under 170 days. Most importantly, they are transaction-linked (Goods or services are delivered, the buyer acknowledges receipt, and payment is then expected).
This should be a staid, predictable asset class. Low volatility. Low fraud. High recovery. The volatility and fraud that do occur trace almost entirely to verification failures, not asset failures. Fix the verification, and you fix the market.
What becomes possible
Traditional asset-backed securitization requires $50 to $100 million in receivables to be cost-effective. Legal fees, rating agency costs, structuring, and arrangement run $750,000 to $2 million upfront. Rating agencies require three to five years of historical performance data. These barriers exclude the vast majority of American businesses from capital markets access.
Technology changes the economics. Continuous verification from the buyer's own systems replaces periodic sampling. Real-time status updates replace stale borrowing base certificates. Automated eligibility testing replaces manual covenant checks. The fixed costs that require scale to amortize become variable costs that work at any size.
Consider a mid-market manufacturer with $10 million in receivables. Today, that company cannot access securitization because the economics do not make sense. Bank lines require personal guarantees and financial covenants that constrain growth. Factoring rates price in verification uncertainty.
With verification infrastructure, that same company's receivables become transparent, and monitorable collateral. Funders see what the buyer sees. Disputes surface immediately. Payment status updates continuously. The asset that was opaque becomes observable. The uncertainty that required pricing disappears.
The scale of the opportunity
If the United States deployed receivables finance at European levels, the market would expand from roughly $527 billion to $2.9 trillion. That is not a typo. The gap between current deployment and peer-country deployment exceeds $2.4 trillion in underutilized financing capacity.
The Federal Reserve's 2024 Small Business Credit Survey found that 24% of small business loan applicants received no financing at all. Denial rates due to excessive existing debt reached 41%, up from 22% in 2021. The IFC estimates the global MSME finance gap at $5.2 trillion annually. These are not abstract numbers. They represent businesses that cannot buy equipment, hire workers, or fulfill orders because capital markets cannot verify their receivables.
The Asian Development Bank estimates that every dollar of trade finance enables three to five dollars of economic activity through multiplier effects. A $2 trillion expansion in receivables finance capacity implies $6 to $10 trillion in enabled economic activity. Even conservative estimates suggest an annual GDP impact measured in the hundreds of billions.
The path forward
Kapwork operates on a simple premise: if you want to know whether an invoice is real, ask the buyer. Not through phone calls that interrupt AP departments. Not through estoppel letters that take weeks. Through continuous monitoring of the systems where buyers already record invoice status.
When a buyer approves an invoice in a vendor management system, that schedule becomes visible. When a buyer submits a dispute, the dispute becomes visible. The seller cannot fabricate these signals. The buyer controls the system of record.
This is what receivables finance has been missing. Not a registry that depends on universal participation. Not a mandate that requires regulatory consensus. Verification infrastructure that integrates with existing systems, producing debtor-confirmed data that funders can trust.
The invoice, as a financial instrument, has been constrained by verification uncertainty for too long. That constraint is now a choice. The technology exists to make every invoice verifiable, every receivable monitorable, every collateral pool transparent. The only question is how quickly the market adopts it.
Kapwork is turning invoices in the United States into fully transactable, reliable, self-liquidating assets. The infrastructure gap that suppressed the market is closing. The economic potential that sat trapped in opaque paperwork is unlocking. The receivable is becoming believable.