Peru’s banks and fintechs see a promising – and profitable – future by working together to develop better financial solutions with technology. But traditional institutions say they are concerned about the road ahead, because the fintech industry is little-regulated.
Peru has been progressing on fintech regulation. But it does not have umbrella regulation for the sector, such as Mexico’s fintech law, which could give a sense of security to partnerships, a particularly important point for banks. But startups say a higher regulatory burden would create unnecessary bottlenecks.
Claudia Ganoza, senior manager of Open Innovation at BBVA Peru, says that, if the fintech industry were regulated, collaboration would be easier, “because it would be one less point of concern, since it is not the sole responsibility of the bank.
“We, as a financial institution, apply the Group’s security measures – such as information security and legal terms – which are the points that make it more difficult for us to connect the startup with the bank.”
BBVA Peru is open to partnering and to developing new opportunities to solve client pain points, and the bank has developed a process to connect with fintech companies, Ganoza told iupana. First, she explains, startups must go through a global analysis, and later a local one.
“We have found the greatest difficulties in support issues, in the way solutions are modeled,” she said. Startups that grant loans linked to the exchange rate is one example: banking regulation means that “this type of solution cannot be easily incorporated.”
Regulatory difficulties for fintech partnerships
More and more, banks are betting on partnerships, especially because they have digital needs that can be quickly and efficiently addressed with third-party solutions.
To date, BBVA Peru has three live partnerships, close to a dozen open conversations and two more close to going live. One of them is with Kontigo, a Peruvian fintech which specializes in developing technological infrastructure for finance companies. The two are working on a loan digitization process.
The pilot showed an improvement in loan disbursement time: from one week to 1 – 2 days, thanks to the automation of many parts of the credit evaluation process that the bank used to do manually.
Kontigo’s co-founder and CEO Mario Cruz says that many institutions are afraid of regulators.
“In the multiple meetings we have had with financial companies, there are areas such as risk controllers, information security and legal that are afraid of working with fintechs, because they see them as informal, and because they they fear the reaction of the Banking Superintendency that, when working with a fintech, may put their eyes on the financial institution,” he told iupana.
Cruz added that when it comes to partnering with banks, fintech companies must comply with extensive regulations, even though there is no framework law.
“There is a legacy within financial institutions of people who have been there for years and see fintech as a competition and something that is going to replace them […], but fintechs come to add [something],” he added.
The Fintech Association of Peru, for its part, believes that the collaborations between banking and fintech have evolved positively in recent years, and that they will continue to do so, because these business models allow for quick action.
The Association points to an urgent decree that promotes access to financing for micro, small and medium-sized enterprises (MIPYMES), enterprises and startups, as well as a new financial leasing regulation prepared by the SBS, to be published in a couple of weeks.
“I have not seen a regulatory difficulty. I have seen that regulation works very well to help fintech companies,” assured Carlo Dioses, vice president of communications for the Association.
For Billex, a fintech that trades foreign exchange for businesses and individuals, the root of the friction between banks and financial technology institutions is not in the lack of a law.
“In the case of exchange fintech, there are quite a few policies on money laundering. I believe that the traditional banking system has not understood well that the fintech business is well supervised internally,” said Javier Pineda, CEO and founder of Billex. “There is no conversation where one understands the other – and that makes collaboration distant,” he added.
In terms of regulation for the sector, Pineda considered that beyond waiting for regulations, organic approaches between banks and fintech would help. But he added that attempts to date have had limited success.
“The ones who have to knock on doors are fintech companies. Today, the negotiation flow goes from the bottom up,” Pineda concluded.
Claudia Ganoza, senior manager for open innovation at BBVA Peru will be speaking at the Lima Fintech Forum on September 29. Register here for a 30% discount from the standard ticket price for iupana readers.