What is Fintech?
The word Fintech is a compound term that comes from joining “fin” from finance and “tech” from technology. It is a term that brings together all those financial services companies that use the latest technology to offer innovative financial products and services.
The Fintech companies have realized the immense amount of money that a few banks were distributing among themselves and have decided to intervene in this situation. The Banks, in their immobility and in their desire to fatten their income accounts, with their monopoly on finance, have “fallen asleep on their laurels.” Now, fintech companies are gaining market by offering the user a much better, nicer and cheaper alternative to their finances.
The Fintech law
The Law to Regulate Financial Technology Institutions (better known as the FinTech law) was approved on March 1, 2018 by the full Chamber of Deputies of Mexico, after several months of discussion in both chambers.
In the opinion of the Fintech Association of Mexico, A.C. (Fintech Mexico), it is a law that will allow progress, with the use of technology, to reduce the “backwardness” that Mexico has in terms of financial inclusion. The association also thinks that it will generate more competition in the financial sector for the benefit of consumers.
Mexico is positioned as the leading market in Latin America, adding 238 startups that offer financial services with the help of technology, according to the Fintech Radars, made by Finnovista. They are followed by Brazil (219), Colombia (124) and Chile (75).
How is this law related to cryptocurrencies?
In the cryptocurrencies sector, the law will define a minimum standard through the Bank of Mexico, in order for Mexican exchanges to offer only virtual assets authorized by this institution. Likewise, it will allow the transmission of money which could encourage the sending of remittances through this technology for the benefit of the users of these services. The Fintech Law does not deal directly with cryptocurrencies, but with those institutions that operate them.
The new legal framework makes it mandatory for all financial intermediaries in Mexico to adopt what are known as open banking platforms. Thus, it is recognized that users’ transaction details are the property of the users and not of the financial intermediaries. Therefore, they can carry them and use them to obtain better financial services in other intermediaries.
Fintech Mexico estimates that this will generate economic benefits up to 5 billion pesos (almost $260,000,000 dollars) a year to families and companies, in interest savings due to increased competition. The obligatory nature of open banking platforms entered into force in 2018 in the European Union and the United Kingdom. Now, Mexico will be the first country in the North American continent to do so for the benefit of making the financial system more competitive and inclusive.
Commenting on this development, Eduardo Guraieb, Managing Director of Fintech Mexico, stated:
“By offering certainty, the new law will enhance the attraction of investments in financial technology companies, making Mexico the epicenter of financial innovation and Fintech in Latin America.”
The law arrived too early
For some, the law achieves its objective of being a regulatory framework to boost the industry; while others, such as Marco Montes Neri, founder of Saldo.mx (a platform that allows payments of services from the United States), consider It is too early to regulate an industry that is in full development.’
Montes Neri stated:
“The sanctions and regulation itself what it does is raise the barrier of entry. I do not know if it’s really adequate. I believe that this is not the time to regulate this sector.”
The truth is that the current Fintech Law that has been approved is very general. Work needs to be done on the design of secondary laws that specify the operation, monitoring and performance of financial technology companies. Also, in relation to crypto coins, laws need to be made to give them the recognition of currency and not of assets.