Colombia’s fintech industry is celebrating the passage of Gustavo Petro’s $250bn development plan, which includes significant advances for the country’s payments space.
On Friday (May 5), Colombia’s legislature gave the green light to President Petro’s four-year plan that paves the way for the left-wing President to implement his social and economic reforms.
The National Development Plan, whose goals target reducing extreme poverty to one digit, handing over 3m hectares of land to poor farmers to boost local agriculture and moving towards green energy, also includes key measures to increase financial inclusion.
Open data to boost financial inclusion
One such measure requires private and public entities to give access to consumer data that could be used to facilitate broader access to financial products and services.
It also establishes that it is the consumer who owns their data, not banks, and they can share that data with regulated third parties.
“We did it!,” Colombia Fintech said, applauding the passage of the plan, highlighting that it has been working with the national government and Congress to make open data mandatory for financial institutions in the country.
Colombia traditionally has a very low level of financial inclusion. According to the World Bank, around 46 percent of the adult population has a bank account and only 22 percent receive their wages or government payments to their account.
The new open data mandate means that banks will now be able to see transactions carried out by other financial institutions before deciding on whether to extend credit to a loan applicant.
“This will make banks compete for customers and, by obtaining more information, the banks will be able to offer better loans and alternatives for the people,” the association said.
“It is essential for the unbanked to become visible to financial institutions in order to receive different kinds of banking services,” it added.
The open data mandate complements Colombia’s open finance regulatory framework, which was adopted last July and established third-party payment initiation as a regulated new activity in the payment ecosystem.
The plan now requires the government to issue regulations implementing the open data scheme, including rules for who can get access to data under which circumstances, as well as setting standards for security, operational and technical aspects of data sharing.
Increasing interoperability between instant payment systems
The plan also gives the central bank (BanRep) the authority to design an interoperable payment system with the ultimate goal of reducing cash reliance in the country.
Lack of interoperability is a serious concern in many countries in the region.
The government’s plan lays out that “low-value payment systems which provide services related to instant payment orders or fund transfers, should be interoperable with one another”.
It orders the central bank to create operative and technical standards for interoperability among instant payment systems and gives it the authority to create and manage an instant low-value payment system and provide the services and technological elements that are necessary for interoperability, such as a central directory.
This statement aligns with BanRep’s recent efforts to modernise the country’s payment system.
In an April report, the central bank said fragmentation is one of the main obstacles as to why digital payment transformation could not take place in Colombia, in addition to other challenges such as the low acceptance of digital payments and low usage of financial products.
Colombia has two low-value payment systems operating in the country: the central bank-owned ACH CENIT, which mainly supports government collections and payments; and the privately-owned ACH Colombia.
Although the central bank was considering building a whole new payment infrastructure, last month it decided that it would set up a clearing system that co-exists with and connects private systems, “thus giving life to a new ecosystem”.
According to Colombia Fintech, altogether these provisions “are key to Colombia's unprecedented leap to consolidate a more robust and inclusive financial system”.