A sector composed of companies that use technology to improve or automate financial services and processes are companies fintech and Ecuador ranked seventh in Latin America in 2022 among 17 countries for the number of fintechs that exist in each of its territories.

However, although they have been operating for a long time, they did so without rules and regulations, only in December 2022 the Organic Law for the Development, Regulation and Control of Technological Financial Services (Fintech Law) was issued, and almost a year later, on November 6, 2023 ., with its rulebook. But issuance is not the same as filing. The experts consulted by this newspaper agree that the adoption of these regulations is a good start for the regulation and growth of this activity, but there are also observations about how rigorous the controls that the authorities must be.

One of the sectors that uses this type of service the most is trade. on the line. For Leonardo Ottati, president of the Ecuadorian Chamber of Electronic Commerce (CECE), the existence of the law and its regulations is a response to a global trend that has become necessary not only to promote new businesses and new technologies, but also to encourage the digital economy of society. “It will always be well appreciated, because this law and this regulation covers many aspects, one of them is that the way is clear for all participants, small, large and medium enterprises to know what they have to do to comply and perform this type of service in Ecuador that definitely already exist and increasingly exist.”

Fintech Law: These are ten articles that regulate technological financial services

According to a study by the Central Bank of Ecuador, published in August 2022: Overview of fintech in Latin America and Ecuador, By 2021, there were 55 in the country fintech according to BuenTrip Hub Radar Tech Startup 13.0 (2021), which showed a 77% increase compared to 2017 (31 fintech according to Finnovista). Compared to other countries in the region, Ecuador ranked below Brazil on that date (771 fintech), Mexico (512), Colombia (279) and Peru (132), according to Finnovista. In Ecuador, from 55 fintech established, those dedicated to business finance management segments stand out (with 38%), followed by digital payments and crowdfunding or collaborative fund representing 15% and 11% respectively.

According to the geographical distribution, it was determined that 56% of fintech (31) were located in Quito, 24% (13) in Guayaquil, 7% (4) in Cuenca, 5% (3) in fintech startups They were located in foreign cities founded by Ecuadorians, and other cities represent 8%. This is the latest study conducted by the Central Bank on this sector.

Meanwhile, Ottati cautions that while the law is in place, regulation is being implemented in steps, and points out that it’s important to understand that these regulations need to be dynamic to keep up with a changing world. “It is an excellent initiative, there is still a long way to go at the regulatory level, what is essentially a law, regulation must be created little by little, control subjects understand this business more and more.”

For the head of CECE, one of the most interesting things about the regulations are sandbox, which are pilot schemes or test moments that are fully regulated by the control authorities at a certain time to guarantee that the requirements are met both at the safety and technological level.

Creating these sandpit are determined by Article 9 of the Regulation. Its implementation will be the responsibility of the Central Bank, the Supervisory Board for Banks and the Supervisory Board for Commercial Companies, which may require cooperation with the Tax Administration, the Financial and Economic Analysis Unit, ministries or other public sector entities during this process. It is also specified that the Committee for Monetary Policy and Regulation and the Committee for Financial Policy and Regulation are the only bodies competent for their regulation, in the monetary and financial sphere.

What activities are allowed for fintech companies in Ecuador

For Ottati, the digital economy is starting to take an increasingly important place in the country’s general economy. This progress of the digital economy in Ecuador is also reflected in the results of the analysis of Ecuadorian digital consumer behavior conducted by Kantar Ibope Media, which reflects that more than 1.8 million Ecuadorians have purchased on the line in the last year. 14% of them actively participate in this type of transaction, buying weekly, and 56% use their own smartphone as the main tool for your online shopping.

Carolina Ibargüen, CEO of Kantar Ibope Media, emphasizes that digital commerce is an even more significant evolution on the horizon as technology continues to advance by leaps and bounds. “The evolution of online sales is a manifestation of the constant transformation in transactions and, even more, the changing expectations of consumers,” analyzes the expert.

Regulations for fintech ‘should be equal’

However, there are also observations and they come from private banking. Marco Rodríguez, Executive President of the Association of Private Banks of Ecuador (Assobanca), emphasizes that in fact the banking sector is one of those that make the most use of technology to provide services, and makes a remark: he cites Basel that at the end of the 1990s they established a fundamental principle in financial activities, which says that for the same activity there is the same risk, and when there is the same risk, there must be the same regulation.

“Financial systems are one chain, they are complete and when that hole is left by someone who has looser regulations or who does not have the same controls or the same technical rigor for providing services, it creates a risk for the entire system, everything is chained, and let’s not forget that behind the financial activities always rely on someone’s resources: depositors, the public”, analyzes the head of Asobanka.

In short, Rodríguez shares enthusiasm for everything fintech that they must arrive and that those that exist grow more, but also their regulation must be very clear and generate controls and requirements for the provision of services. “It cannot be that a bank or a cooperative tells you that in order to issue a credit card you must comply with a, b, d, e, f, and a non-banking, non-cooperative entity, fintech You say no, you can issue a credit card without complying with any of this, everything has to be the same.”