The Committee for Monetary Policy and Regulation issued a norm that regulates fintech activities in Ecuador, with this resolution JPRM-2023-014-M dated Monday, August 7. This, after the publication of the Organic Law for the Development, Regulation and Control of Technological Financial Services (Fintech Law) on December 22, 2022, was approved in the Legislative Assembly on October 30 with 74 votes in favor.

At the moment, there are already companies in Ecuador that provide services based on fintech, which until now have operated without special and specialized regulations on the matter.

The Fintech Act was published in the Official Gazette

In 2022, the country was seventh in Latin America out of 17 nations in terms of the number of fintechs that exist in each of its territories. In 2021, it counted 60 fintech companies located in Quito, Guayaquil and Cuenca. Of this, 38% is devoted to the management of business finances, and the majority to the replacement of paper invoices with digital ones. The second and third relevant activities are digital payments (15%). Crowdfunding or collaborative fund occupies 11%. In Ecuador, fintech companies grew 77% between 2017 and 2020.

What does the new regulation say about Fintech?

This new regulation dedicates the entire 3rd chapter to the definition, services and operation of specialized electronic deposit and payment companies (Sedpes) that will carry out fintech activities in Ecuador.

The Regulation defines the activities of these entities for receiving funds solely for the purpose of enabling payment and transfer of funds through authorized electronic means of payment; and sending and receiving money orders.

Among the services for which they are authorized are:

In the meantime, to operate, Sedpes must request approval from the Central Bank of Ecuador (BCE), which will verify compliance with the requirements and extend the authorization to operate in accordance with the provisions of the standards.

The approval will determine the transaction activities and operations that the subject can perform, as well as the type of means of payment that can be used. Approval cannot be granted under any heading and may be revoked by the ECB for non-compliance or abuse, in accordance with the new regulations.

In addition, after the authorization to operate has been issued, the Banking Supervisory Authority will issue a license or authorization to perform the corresponding Fintech activities. The regulations also warn that Sedpes may only manage electronic means of payment expressly approved by the ECB.

In addition, in terms of liquidity, the regulation indicates that all funds of Sedpesa clients, except for what corresponds to the reserve, must be kept on deposit in accounts with BCE or in accounts of financial entities that hold reserves with BCE.

The mandatory liquidity reserve will be calculated on the basis of the information structures that Sedpes must submit daily to BCE and where the daily balance of their deposits is recorded.

Meanwhile, as for the reserve that these entities must maintain at the ECB, the regulations indicate that it must be calculated based on the weekly average of daily deposit balances, according to 0.5%, which is the reserve requirement percentage for this type. institution.

The use of cash in the region is declining, while cards and other digital payments are growing

“The Sedpesa reserve must be established with a balance in United States dollars in current accounts held at the Central Bank of Ecuador. This mandatory reserve will be considered as an addition to the funds maintained by Sedpes for liquidity reserves in financial entities with a mandatory reserve at the Central Bank”, according to the regulations adopted by the Board.

To this end, a general provision of the regulation establishes that these specialized electronic deposit and payment companies will open special accounts with BCE to meet reserve requirements. However, according to the transitional provision, Sedpes will fulfill the mandatory reserve requirements after a period of three months after obtaining the authorization to operate.

As for the prohibitions, the norm prescribes two: that these entities may not perform any type of lending, financing, deferred payment or any activity that implies or simulates the placement of funds; and that in no case may they use public funds to pay their own obligations.

In the meantime, the ECB has seven months to issue the necessary regulations to implement what was resolved in the resolution issued by the Monetary Policy and Regulatory Committee.