After almost a year in the back seat, the fintech law in Chile is now approved in Congress.
This month, Congress unanimously approved the bill to formalize the sector and outline a framework for open finance. After being approved in the Lower House and the Senate, the project awaits a final signoff from President Gabriel Boric.
The previous administration presented the fintech law in 2021.
But its passing was delayed as a new government was sworn in. Under leftwing president Boric, the Andean nation went through a process to rewrite its constitution this year. Therefore, there was little room for political discussion outside the reform agenda.
The fintech sector will benefit
Now, fintech leaders are confident that the project is close to securing approval and that the sector will benefit highly.
“Everything that points to better regulation is good for the industry,” Diego Fleischmann, CEO, and Co-founder of Migrante, a Santiago-based fintech, told Fintech Nexus. “Companies in the sector will have better access to capital, and customers will have more confidence in these startups.”
Chilean fintech experts had warned that the country could risk losing an opportunity without a legal framework. But after the constitutional referendum, the debate has been rekindled.
The law will regulate several aspects of finance in the country, from open finance to crowdfunding, cryptocurrencies and stablecoins, and Robo advisors.
“Although all these business dynamics have been working for several years due to the country’s economic liberty, it is a reality that a clear legal framework will encourage new companies and investments,” Angel Sierra, executive director at Chile’s fintech association, told Fintech Nexus.
Chile joins other countries in Latin America
With the fintech law, Chile joins Mexico as the two countries in the region with tailor-made frameworks for the sector.
The North American country was a pioneer in 2018 when it passed its version of a fintech law. Other countries have pursued a different approach. In the case of Brazil, the government regulated verticals within the industry, as opposed to a comprehensive law.
Chile’s fintech law establishes the basis for the development of open finance. In doing so, it is following in the footsteps of Mexico and Brazil. Those are the only countries in Latin America that have addressed the concept.
“Within open finance, the digital identification of customers will be allowed and facilitated,” Chile’s finance minister, Mario Marcel, said.
“This will create a regulatory base from which it will be possible to produce greater innovation and competition in the provision of financial services.”
Chilean fintech ecosystem
The Chilean fintech ecosystem represents roughly 7% of all fintechs in Latin America and the Caribbean. As of 2021, there were 179 fintech companies in the sector. That is almost three times as many as it had five years ago (65).
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In Chile, fintech leaders are confident that its passing will generate momentum for the industry.
“The law will bring greater confidence on the part of citizens for adopting fintech services,” Sierra said. “It creates better incentives for investments, which will attract talent and create new, improved financial services in the country.”