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Fintech regulation: Why are good expectations

The proposal released by the Commission for the Financial Market (CMF) is a good first step to start the debate, but “there is still a long way to go given the particularity of the multiple business models of the industry”.

The announcement

Last month, during Chile Day New York 2019, the Finance Minister, Felipe Larraín, announced the sending of a Fintech bill to Congress, which seeks to regulate and supervise various alternative finance services and the transaction of assets. virtual According to the experts, the signal could not be clearer: the international financial community should know that our country is not going to be left behind as far as financial innovation is concerned. “This bill that will regulate fintech companies is of such importance that it will be by far the greatest opportunity for the Government to demonstrate its commitment to innovation and financial inclusion in the country. Today we see that the proposal made known by the Commission for the Financial Market (CMF) is a good first step to start the debate, but definitely there is a way to go given the particularity of the multiple business models of the industry”, says Ángel Sierra, executive director of the Fintech Business Association of Chile (FinteChile).

Although today there are more than 100 Fintech companies, Chile is the only country of the referents in Latin America (Brazil, Mexico, Colombia, Argentina) that does not have any type of fintech regulation and, additionally, it is not seen for the moment interest in Seriously address open banking or Open Banking. “The aforementioned results in investors and foreign fintech companies prioritizing their landing in neighboring nations, where they show the greatest progress in terms of financial innovation”.

The future fintech companies

In this regard, he says that the announcement that banks can invest in future fintech companies is positive, because it is a very successful step by the Government because the natural buyer or partner of this type of company is a bank or any actor the traditional financial industry. “That is why a country should be concerned about having a large, dynamic and innovative fintech industry; since in the long term – via acquisitions or Open Banking – all the actors will end up interconnecting to make way for what is now beginning to be seen in the main financial centers of the world: extended and digital financial systems”.

It should be noted that fintech are non-traditional companies leveraged in technology that lend or contribute to the improvement of financial services. FinteChile also aims to represent and boost the growth of the industry through the strengthening of the key pillars of the sector, such as regulation, capital, talent and demand. It was founded in December 2017, today it already has 50 associated companies and is the representative of the country before the Ibero-American Alliance of fintech.

Great importance

A greater offer of financial services in the market with lower associated costs, a traditional financial system much more determined to innovate and collaborate with both Fintech and other digital companies, and a government in the process of learning and preparing to capitalize as best as possible the advantages of this type of company are, according to Sierra, some of the changes that the fintech industry has generated in Chile. “Both in the country and in the rest of the planet, the importance of fintech companies is very high due to the healthy and very necessary ‘challenge’ to the status quo that this nascent industry poses to the traditional financial system. In fact, it is the same authorities of the World Bank and the IMF who, at the end of last year, openly requested the governments of the world to incorporate fintech into their financial ecosystems as soon as possible, due to the evident results that are now beginning to be observed. : new and improved financial services that enhance the financial inclusion of countries”.

Regulation, capital, talent, demand

In this context, he argues that the four pillars that sustain this fintech industry -regulation, capital, talent, demand- still have great opportunities to be strengthened. However, he adds that the main difficulty facing many of these companies today are the regulatory gaps or gray so they can operate and be legitimized. “The foregoing generates an important skepticism on the part of investors, users and others; which prevents the sector from developing at a greater speed”.

The competition

In his opinion, in Chile in addition to regulation, Fintech and most of the digital-based companies are missing a more developed Venture Capital industry and equally technological talent. “On this last point it is very important to note that today the fierce competition between nations for the attraction of computer engineers and developers has become evident, and that if our country does not redouble its efforts in this, not only its fintech industry is at risk, but also a important portion of the country’s digital transformation”.

However, he believes that Chile can become a pole of regional development in this matter, because although it currently lags behind other countries, the reality is that it could capitalize on the regulatory errors that other nations have committed to take leadership. “It is very important that financial innovation become a state policy, not only to have a regional fintech pole, but to improve the financial inclusion rates of all its citizens and small businesses”.


Also published on Medium.

Published inFintech

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