On March 9, 2018 the Mexican government published a new financial technology law, called the Law to Regulate Financial Technology Institutions (Ley para Regular las Instituciones de Tecnología Financiera, or Ley Fintech). The text of the law states up front that’s its goal is to “regulate the financial services provided by financial technology institutions, as well as their organization, operation and functioning and the financial services subject to any special regulation that are offered or carried out by innovative means.” Conventional banks in Mexico have long been regulated of course but the recent surge in new technologies and tech startups in the financial sector has been making both regulators and old-school bankers jumpy. This, then, is a first stab at setting up a basic regulatory environment for the new wave of mostly internet-based access and transaction platforms and products.
The new law covers two currently popular nerve-inducing areas of innovation at the intersection of tech and financial services: cryptocurrencies and crowdfunding, as well as other more arcane but equally important topics such as Application Programming Interfaces (APIs) and so-called “sandbox” regulations, under which innovative products may be tested live under controlled conditions. A wide range of relatively new technologies such as digital wallets, mobile payments and others are covered as well. New frontiers of financial products and services are notoriously complex (eg. The Mortgage Backed Securities that played a key role in the 2008 economic crisis) so we will not endeavor to walk through the various chapters of the new law in this space. You are welcome, however, to read all the heart-pounding stipulations of the law in the Official Gazette. The main point we wanted to mention is that as usual, the law provides a general guideline but the specifics will be spelled out in the secondary regulations, to be published at an undetermined point in the future. The law establishes that the National Banking Commission (CNBV) must issue a first set of regulations within six months of the law’s publication, a second set within 12 months, and a third set within 24 months (the sets refer to different groups of articles and fractions within the law).
The fintech law itself, at least, is a done deal. We’ll see how on time and on budget the secondary regulations appear, but in the meantime, a host of new fintech enterprises are launching right and left, and presumably some of these will begin to nibble into the record profits Mexican banks reported in 2017. We particularly look forward to the future success of fintech innovators backed by our disrupty colleagues over at Agave Lab, such as Digitt (debt refinancing) and Fondeo Directo (crowdfunded factoring). Industrial regulation has a long history of creating winners and losers, and as Mexico’s financial services industry moves into uncharted territory, we are hoping that the new legislation will help make winners out of consumers and innovators. The banks have been the undisputed winners for long enough under the old system.