Draft legislation to regulate Mexico’s growing financial technology (fintech) sector has been approved by the Senate and will be considered by the lower house in 2018.
If signed into law, supporters of the bill say, it would offer legal certainty to fintech companies, increase competition and better access to banking services for millions of Mexicans.
Approximately 300 fintech companies currently operate in Mexico and the market is growing faster than in any other country in Latin America.
A National Action Party (PAN) deputy said that members of the finance committee she heads would first analyze the legislation in January before it is passed to the entire lower house for consideration in the next sitting period.
“We are going to start to study the draft. What we do think is important is the regulation of advanced technologies in financial matters . . .” Gina Cruz Blackledge said.
Experts say that the legislation — called the Law to Regulate Financial Technology or the Fintech Law for short — will help to close the financial inclusion gap, a problem that is widespread in Mexico.
Consumer protection agency Condusef warned last month that almost 600,000 people are at risk of losing their savings because the savings and loans cooperatives where their deposits are held are on the verge of collapse.
In most cases, people use the funds known as Socaps because they live in rural areas where there are no banks. Only 800 of Mexico’s 2,492 municipalities have bank branches, according to Condusef data.
Mexico has just 1.5 bank branches per 10,000 adults compared to 4.7 in Brazil, the 2016 National Report on Financial Inclusion said, while Mexico also lags well behind Brazil in terms of access to automated teller machines (ATMs) and terminals where payments can be made electronically.
Just 39% of Mexicans over the age of 15 have a bank account, according to data from the World Bank.
The co-founder and CEO of venture capital fund Ignia said that because fintech companies don’t depend on traditional infrastructure, they can increase accessibility to financial services and help to alleviate those problems.
“Large companies tend to be very bad in developing new technologies, in innovating, in being disruptive with themselves. In the great revolutions of recent years in the world, it wasn’t the large players that made the disruption,” Álvaro Rodríguez Arregui said.
The founder and CEO of Prestadero, an online loan company, said the law would benefit both fintech companies and the people who use their products.
“We have always wanted regulation because it protects users of our products from the start. In a way you don’t trust [them] so much because there is no specific regulation, and it also protects us . . . and the investors. It gives us legal certainty and with that there are many things that we can do for customers, investors and possible partners,” Gerardo Obregón said.
Other industry figures also threw their support behind the initiative, including the CEO of another loan company, Creditea, who also recognized the diversity of the sector the law seeks to regulate.
“The fintech issue is complex because it’s not just companies like us, that are online, but also cryptocurrencies, payment methods. There is a lot to this wide definition of fintech, but it will certainly give certainty to the market and bring growth,” Adrián Fernández said.
The head of fintech at Ernst & Young, Gonzalo Núñez, said that Mexico could be one of the world’s top three fintech countries in the next three to five years.
Source: Milenio (sp)