Mexico City — Mexico is laying the groundwork to modernize and reform the regulatory framework for financial technology companies, as the government looks to boost a rapidly growing sector, but whose rules have lagged behind, Deputy Finance Secretary Gabriel Yorio told Bloomberg Línea.
According to a report by Fintech Mexico, only 46 out of 650 fintechs in Mexico currently operate under the country’s “Fintech Law”, sanctioned in 2018. The National Banking and Securities Commission (CNBV) says it has authorized 65 fintech companies.
The Finance Secretariat recently organized its first “Fintech Week” and is looking to work with industry chambers and companies to outline a roadmap for gradual changes in the country’s regulation.
“Such meetings generate opportunities to identify what type of actions or reforms we need to make; I believe that this will be the Group’s main deliverable (...) I believe it would be a mistake to continue to pretend as if the sector did not exist,” Yorio said.
The public-private partnership will look to decide on specific reforms to the Fintech Law, adjustments to secondary regulation, but also on the alignment of local regulation with international best practices.
Fintech Law Has “Fallen Short”
The Law to Regulate Financial Technology Institutions, known as the “Fintech Law”, will have been in force for five years in March 2023, however, Yorio considered that it has fallen “short” in its implementation.
The Deputy Secretary pointed out that there are fintech institutions that have not been able to find the regulatory category under which they can operate in Mexico; consequently, they have established themselves as “SOFIPOS,” or payment aggregators, among other categories, in order to be able to operate.
“We need to modernize our regulation. With a sector that is growing fast, we think it has such an opportunity for even more growth that could help boost our financial market by expanding the range of options, products and services to which the population can access,” Yorio added.
Yorio pointed out that there are some companies that do not necessarily have to be authorized to operate as fintechs because they do not hold deposits from clients.
In that sense, regulatory reform will not necessarily mean that the government wants to regulate all of these companies, but rather that it will seek to protect users when there are deposits being held or when third party assets are managed.
“We are not looking for a regulation for 600 companies, what we do want is to identify or establish a friendly regulatory framework for fintechs to flourish (...) there will be other companies that may not need regulation, but that provide financial services, and what we need to do is to monitor them to protect users,” Yorio continued.
When Will the Fintech Law Be Updated in Mexico?
The Deputy Secretary added that it is unlikely for this reform initiative to make imminent progress in Congress due to the electoral climate that is the rising as the country moves into the final stretch of the Andrés Manuel López Obrador administration.
A roadmap, however, is likely to be feasible this year, while the government will seek to implement all of the changes it can ahead of the 2024 presidential elections.
“We must integrate the fintech sector into our financial market, regulate it in the best way possible, not inhibit innovation and make the most of it (...) We cannot waste any more time and, although we are in the last year of the administration, it is worth the effort,” he concluded.
