On a previous occasion, we spoke with Amintore Confalonieri, entrepreneur and startup advisor, who shared with us from Mexico his vision of what 2022 left behind for the fintech sector, startups, crypto-industry and their current situation in the face of the economic uncertainty that is lives globally.
On that occasion, in relation to whether in Latin America in general there was a friendly regulation for the development of the fintech sector, Confalonieri highlighted that the terms “regulation” and “friendly” do not always go hand in hand. Having said this, he also stated that in several countries such as Mexico, Colombia and even Venezuela, despite having made important advances in Fintech regulation, an entrepreneur from these countries is rarely heard referring to said laws as friendly and easy to adopt.
On this occasion, Sebastian Estrada from the El Economista Portal has published a note in which he reviews that the Fintech sector in Mexico has shown constant growth since 2019, and that even despite the closure of different startups, the ecosystem remains “ahead”.
According to Estrada, According to the data presented by MasterCard and Finnovista, Mexico has 650 financial technology companies, 138 more firms than those registered in the previous survey and a compound annual growth of 18 percent.. However, he mentions that data from the Finnovista Fintech Radar México 2023 indicate that segments such as insutech and those related to open finance (openfinance) did not have the expected performance, since a greater number of these companies was forecast.
“In part, the lack of regulation is pointed out as one of the main obstacles”wrote.
In this sense, Estrada took the opportunity to highlight what was said by Fermín Bueno, founding partner of Finnovista where he denounced that there is no regulation, and what was seen was insecurity, where the entrepreneurs did not know that they were going to fall and they get discouraged. “This uncertainty is also transmitted to the investor, which is the most important thing, since investment capital is the blood that runs through the veins of startups”said Bueno to Estrada.
In this way, Estrada points out that with the information handled, it is shown that in the fintech universe, the regulated sector is significantly smaller compared to the unregulated Fintech ecosystem, since only 10% of Fintech companies are operating with a Fintech license. in the country, both as a Collective Funding Institution and as an Electronic Payment Funds Institution.
“In perspective, 12% seek authorization in terms of the Law to Regulate Financial Technology Institutions (Fintech Law), while 34% operate under another figure, 14% are seeking a license not related to the Fintech Law and 30% operate under the license of a third party”Estrada explained.
open finance waiting
Besides, Estrada mentioned that despite the high expectations that were held in terms of the open finance and insutech segments, these were the ones that reported the lowest growth since the first registered 10 new ventures and the second only three, in addition to the collective funding of which Two new firms were registered.
Fermín Bueno, for his part, He would have pointed out that despite the fact that the financial technology sector shows growth and resilience in the face of the macroeconomic scenario, the lack of regulation in technologies such as open finance is limiting the growth of the ecosystem.
“In the insutech sector, we don’t really know what this (growth) is due to, on the one hand there is no regulation, on the other hand, insurers are not very active in the ecosystem, perhaps it represents an opportunity for others. Lastly, openfinance too, which is experiencing significant growth, although it is still a small segment, but there are great development expectations”expressed the founding partner of Finnovista.
In turn, Estrada recalled that the Inter-Institutional Committee, made up of the Ministry of Finance and Public Credit, Banco de México (Banxico) and the National Banking and Securities Commission, left pending the rules for the operation of open finance, since there are no subsequent indications since the publication of Banxico’s circular 2/2020, where the first provisions regarding article 76 of the Fintech Law for the integration of Application Programming Interfaces (APIs) were issued.
In this context, Estrada pointed out to Mauricio Schwartzmann, general director of MasterCard México, who expressed that the remaining regulations on open finance and open banking are expected to be released in 2023.
“2023 will be the year where we are going to see the regulation moving, there is a lot of activity in the ecosystem, so there is a lot of expectation. Normally open banking and open financing there are two fronts, one is the data part, the other is the payment part. The regulators will provide the certainty that is needed for this segment of the industry to develop a lot”commented Schwartzmann.
Little Investment does not discourage Fintech
Lastly, Estrada mentioned that although the information cited by the Finnovista report indicates that 2022 was a year with essentially lower investment volumes in terms of venture capital, the Fintech surveyed are optimistic about the results expected in the 2023. According to the study, during the first semester of 2022, diversification was greater, and a greater number of negotiations and a lower investment amount were recorded, compared to the same period in 2021. The reason for this greater diversification would have been the pronounced drop in investment in late stages and a significant increase in seed investment in early stages.
“Despite the context, the entrepreneurs indicated that their expectation of closing sales for 2023 is higher than that of 2021. According to what was presented, their expectations are mainly based on the generation of alliances and strategic collaborations with other companies in the ecosystem, followed by innovation in their sales strategies and portfolio improvements”Estrada added.
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