Ximena Aleman is a co-founder and chief business development officer at Prometeo, an open banking platform for Latin America.
It can have entered the game later than other leading regions like Europe and North America, but the fintech industry in Latin America is dynamic and growing fast. The sector was recently valued at over $ 150 billion and continues to grow compared to the previous year.
And while the longer-term impact of COVID-19 on the sector remains to be determined, there is no doubt that there is demand for certain fintech products Solutions are on the advance. As smaller financial institutions in the region are under pressure from digitization, many fintechs are asking to help them in this way. In addition, a number of SMEs are looking for digital credit services to deal with the crisis.
The rapid expansion of the sector has led to increasing pressure on regulators in LatAm to pass laws that deal with the murky waters of fintech activities and offer confidence to consumers and investors alike. However, regulation across the region needs to be careful not to suppress innovation, while startups need to figure out how to be agile in an increasingly regulated environment. Let's take a closer look at the impact of regulation in LatAm so far and what needs to be done to balance sector growth with public trust.
The development of fintech regulation across LatAm
Mexico is currently the leader in Fintech regulation in LatAm thanks to its comprehensive Fintech Law of 2018. The law covers most fintech activities, including crowdfunding, virtual wallet, cryptocurrency transactions, and open banking. In addition, there are certain financial laws in Mexico that regulate financial companies when executing transactions with fintech. The law also provides a sandbox for licensed and unlicensed companies.
Brazil is at the top of the list after Mexico, since it regulates crowdfunding and peer-to-peer loans individually, while a special Congress commission is working on a more comprehensive legislative strategy. The Brazilian central bank is also working to enforce the open banking law by the third quarter of 2020 to pave the way for a thriving open banking ecosystem.