On May 1, 2019, Mexico passed the Law to Regulate Financial Technology Institutions, better known as “Ley Fintech,” which among other mandates requires financial institutions to establish open application programming interfaces (APIs) to make financial data accessible. This could have a great impact on fintechs in terms of money transfer, financial planning and savings segments. In Brazil, on the other hand, the National Monetary Council (Conselho Monetário Nacional, CMN) recently regulated direct credit companies (financial institutions that provide loans and financing and acquire collection rights, always with their own capital) and P2P loan companies (which are financial institutions that broker loans and financing between peers).
Although there are currently no other countries in the region with such regulations, Chile, Colombia and Peru are making small efforts into both promoting innovation and establishing a safe environment for open banking to arise. In Chile, the Super Intendencia de Bancos e Instituciones Financieras (SBIF) issued instructions to banks on cybersecurity matters in response to the growing use of information technologies in financial markets. In 2014 in Colombia, Ley de Inclusión Financiera (Ley 1735 de 2014) was passed, creating specialized companies in payments and electronic deposits authorized to capture money, make transfers and payments. In 2018, Superintendencia Financiera de Colombia created Innovasfc, an innovation center to support and develop fintechs, ensuring protection to the customer. Finally, Peru is currently considering a law that seeks to regulate platforms used for financial crowdfunding.
What’s next for banks?
The Economist surveyed nearly 400 global banking executives to better understand the challenges facing retail banks and the strategies they’re implementing or plan to implement, as competition with fintechs grows more fierce. 55 percent of Latin American respondents answered that the biggest impact on retail banks by 2020 will be the changing customer behaviors and demands, while 48 percent believe it will be the changing competitive environment (new entrants/fintech disruptors).
According to respondents, it seems that there are two strategies in addressing these trends: specialization by market/product or taking on the apps and collaborating with fintechs. 61 percent of global respondents believe it is necessary to develop a niche that will retain customers, and therefore increase their loyalty. Another approach to this strategy is to focus on a specific product/feature from standard banking (savings, etc.) and develop different tools that promote its use.
Ahead of open banking and open APIs, banks do not want to simply open up to third-party providers, as their products may lose their aggregated value. Instead, they plan to either partner with fintechs or create their own fintech partner and offer products through them. Such a partnership would lead to more innovative technologies that will accelerate new services, creating a win-win situation not only among banks and fintechs, but for the final customer experience as well.
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