Until 2018, the year in which the so-called Fintech Law (the Law to Regulate Financial Technology Institutions) came into force, Fintech companies that operated in Mexico did so without having a completely clear legal framework, acting in a regulatory area “Gray” and even, in some cases, operating in breach of the regulations in force at that time.
From a legal perspective, before the Fintech Law, the Fintech companies operating in Mexico had to “live” with the risks that some of their operations could be considered as irregular fund-raising (activity reserved for popular banks and financial companies) and / or as a massive offer of securities (in contravention of the Securities Market Law, for not having the authorization of the CNBV). Seeking to reduce these risks, some Fintech companies used complex legal schemes through trusts and mandates that, unfortunately, also affected the transparency of their operations to the detriment of end users and, in general, the financial system.
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The growth of the Fintech industry in Mexico, on the one hand, responds to the need of Mexicans to have financial services that are simple to operate and, on the other, to the government’s need to promote financial inclusion in the country. The Fintech Law recognized these needs, seeking to eliminate the “gray” regulatory areas where Fintech companies operated, as well as the legal-structural risks associated with that operation.
In other words, the Fintech Law comes to recognize, order and regulate a market that already existed and operated in Mexico, eliminating those risks for Fintech authorized by the Government, and at the same time, establishing a legal framework to protect consumers and the financial system.
The Fintech Law is the result of joint work between the Government and the private sector (obviously covering Fintech companies, but also traditional “players”, such as banks). In this sense, it addresses (to a greater or lesser extent) the main concerns related to the operation in the financial market; particularly, in transparency for the benefit of users, protection of the system in general (prevention of systemic effects), and reduction in the risk of money laundering. In addition, it helps to avoid regulatory arbitrage between entities that, although they operate under different legal figures, compete in the same market.
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Fintech regulation is not limited to the Fintech Law, but encompasses a series of secondary regulations issued by financial authorities, particularly by the CNBV, BANXICO and CONDUSEF which, based on that law, substantially complement the regulations on the matter. . The Fintech Law establishes general principles and rules, expressly empowering the authorities to regulate the daily operation of Fintech companies through secondary provisions. This authorization gives the Fintech regulatory framework flexibility to adapt to market needs and technological advances without having to go to the Congress of the Union to modify the law.
In my opinion, the fact that in Mexico there is a specific legal framework for the Fintech industry implies having the best ally for the growth of that sector, because it does not hinder the entry of new players to the market, in fact, it helps to promote that inclusion under clear rules that did not exist before. This regulatory framework should not be understood as an undue entry barrier, but rather as the most recent expression of the historical need to regulate the financial sector.
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Like any legal framework, the Fintech legal framework will evolve over time, “learning” from experience and adjusting to new realities. This evolution will be focused on strengthening the integration of financial services between the different players in the market, and will facilitate the association between Fintech and “traditional” entities to combine the best of both worlds for the benefit of users and the country.
Before concluding, it is important to mention that the Fintech Law not only regulates Fintech companies, but also includes a legal framework to continuously promote legal innovation, through the figures of “Novel Models” (the so-called “sandboxes ”That allow disruptive products to be tested in controlled environments) and“ openbanking ”(that facilitates the exchange of information between all financial actors, with the aim of generating new and better products for consumers).
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Luis Cárdenas, Executive Director of Legal Advice and Corporate Governance at Banco Sabadell *
The opinions expressed are solely the responsibility of their authors and are completely independent of the position and editorial line of Forbes Mexico.