QUITO — With 74 votes in favor, Ecuador’s National Assembly approved on Sunday the draft law for the development, regulation and control of technological financial services, known as the Fintech Law, which aims to provide legal certainty to financial technology companies operating in the country, as well as to foreign companies seeking to set up shop and invest in Ecuador.
The law also seeks to provide users with secure access to such services and certify the protection of their data.
The National Assembly announced the law’s approval in a tweet.
Elina Narváez, speaker of the Assembly, said the approval of the initiative “will open an important space for financial inclusion and innovation in Ecuador”.
According to Narváez, certain elements have been added to the law, such as the restriction on financial institutions investing capital in fintech companies, “to avoid market monopolization”.
In addition, the law stipulates that sensitive, reserved and confidential information will be housed in servers within Ecuadorian territory, while the law also regulates so-called neobanks.
What does the law cover?
The initiative defines fintech activities as the development, provision, use or offering of means of payment centered on technology, technological financial services, specialized companies of electronic deposits and payments, as well as technological services of the securities market and insurance.
The regulation, which consists of 21 articles, establishes the principles and requirements for the exercise of fintech activities, and also sets out reforms to the law of entrepreneurship and innovation, the country’s monetary and financial code, and the code of the social economy of knowledge, and which will be debated on by the national assembly.
Fintech in Ecuador
According to the IMF, financial inclusion through fintechs, through the use of cellphones, can boost a country’s annual economic growth by up to 2.2 percentage points. Fintechs are also strategic allies of traditional banking, offering financial services especially for vulnerable populations.
In the region, Brazil, Uruguay, Mexico and Colombia lead the market in terms of the number of active companies offering financial services focused on technology or with a high technological component.
According to a study by the Central Bank of Ecuador, of the 12 existing segments, the main services in which fintech companies are engaged in Latin America are digital payments (28%), loans (21%) and corporate finance management (16%).
But fintech is still a nascent market in Ecuador. To 2021, according to BuenTrip Hub’s Tech Startup Radar 13.0, there were 55 fintechs operating in the country, up 77% from 2017 figures, but are still relatively few compared to the aforementioned countries.
Most fintechs are focused on business financial management services (38%), digital payments (15%) and crowdfunding or collaborative fund (11%).