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Following the election of Colombia's first left-wing President, Gustavo Petro, Colombian firms are worried about what this means for the emerging fintech landscape. Meanwhile, Colombia Fintech is pushing for a comprehensive cryptocurrency framework and a gradual open banking regime.
Last week, Colombians wrote history when they elected Petro as the country’s first leftist President. Petro, a former guerilla fighter and a progressive mayor of Bogotá, Colombia’s capital, arrived at the presidential seat with the promise of serving the most unprotected people in the country, including those living in rural, black and indigenous communities.
However, in early June, after the first round of elections saw Petro and populist business mogul Rodolfo Hernández emerging as candidates, the fintech industry has raised concerns about how the results could impact the fintech sector.
Erick Rincón, president of the Colombia Fintech association, told local media iupana at the time that “there is not one strong proposal from any of the parties that’s oriented to the fintech sector”.
Edwin Zacipa, founder of Fintech Latam Hub, warned that change in the political landscape may negatively affect macroeconomic indicators and would make it more difficult for fintechs to attract capital.
Meanwhile, Hernández gradually emerged as the preferred choice from a market perspective, given that he “represents some continuity in terms of economic freedom and free business”, media quoted Andres Abadia, head economist for Latin America for Pantheon Macroeconomics, as saying.
Colombia Fintech welcomed Petro Gustavo as President-elect, stressing that it is open to engaging with him to work towards digital financial inclusion.
Fintechs’ requests to the new government
Colombia is one of the most undeveloped markets for payments in the region, according to VIXIO analysis. With low financial inclusion and digital readiness, as well as a relatively uncertain regulatory environment, the country is well behind market leaders in the regions, such as Brazil and Chile, in terms of payments market development.
According to the country's central bank, only half of the businesses accept some form of electronic payment and cash is the overwhelmingly most popular payment method.
In recent years, however, the country has started to position itself as an emerging fintech hub for the region.
The current leadership has been active in trying to promote the development of digital payments, including launching a regulatory sandbox in 2020 to support firms to test and develop new products.
The country is also set to adopt a voluntary open banking framework and started to research the potential challenges and benefits of an instant payment system that would enable immediate payments for merchants.
Earlier last week, just before the election, Colombia Fintech released a list of five requests it made to the candidates on behalf of the country’s fintech industry.
According to Rincón, fintechs have made a significant contribution to increasing financial inclusion in the country and are capable of competing with technology companies at the international level.
In the next four years, these firms will face enormous challenges that must be addressed from the side of public policy, Rincón stressed.
The trade group urged Petro and Hernandez to include in their government proposals initiatives that support the consolidation of the Colombian fintech ecosystem and continue to work towards positioning Colombia as a fintech hub in Latin America.
In particular, the association asked the politicians to adopt a comprehensive regulatory framework for cryptocurrencies and crypto-assets.
As in many Latin American countries, crypto-assets have grown fast in Colombia over recent years, largely because they can be used to pay for goods in the country and provide a viable alternative to cross-border payments.
Rincón claimed the government has been working on an announcement for three months that is supposed to regulate deposits and withdrawals between banks and crypto-exchanges.
“We are urging you to accelerate this process as banks continue to close accounts without a legal cause," the association’s president warned.
Colombia Fintech also pressed for a gradually introduced, mandatory open banking framework that involves all stakeholders.
The list also included a request to enhance the interoperability of instant payments in the country.
According to Rincón, this need has already been identified and now “efforts should be made to work together with the central bank on a solution that allows for a payment system that generates trust, lower costs and, above all, is available for all the different bank users, non-bank users and users of other electronic payment solutions”.
In addition, the trade body is seeking more clarity regarding consumer credit fees that are assigned to the consumer when they apply for credit via digital means. That could provide a harmonised criteria for authorities to supervise businesses and increase trust with consumers, Rincón said.
Finally, the association urged the then-candidates to add fintech as a priority category when they measure indicators of financial inclusion.
The government should "revise the methodology and the indicators [of financial inclusion] taking into account information obtained solely from traditional financial institutions”, Rincón said.
