The Paraguayan e-payment bill sparking dissent between telcos, banks

A bill under debate in Paraguay's congress, the main aim of which is to increase security for electronic payments, has created dissent between mobile carriers and banks.

According to the telecom industry, the bill could stifle the country's successful progress in digitally-driven financial inclusion.

"As it stands now, the bill creates hurdles for a segment that has been thriving in the country, which is mobile payments. Paraguay has become a regional benchmark for this segment in recent years and this progress is now at risk,” Maryleana Méndez, general secretary of the Inter-American telecom association (Asiet), told BNamericas.

Concern in the telecom industry is focused specifically on article 103 of the bill, which states that electronic identification must be issued by an ID system with a high level of security, essentially creating a second layer of user identification to be defined by regulatory bodies.

Méndez argues that if the project is approved with this article, a third entity – likely the central bank – would have to act as an identification certification body, which would stymie operations, increase service costs and affect both users and service providers. 

She called for this article to be removed or reworded to eliminate the intermediary. 

The bill has been passed by the senate and is now under discussion in the lower house.

Méndez says Asiet shares the common goal of providing security to electronic transactions, but that mobile service operators are already committed to protecting the rights of users and the security of their data and that digital wallets have proven to be useful, reliable and secure.

Another argument from the telecom industry is that the security requirements for mobile wallets in Paraguay would be higher than those in countries with greater banking penetration, such as European markets.

“Operational barriers to the use of electronic wallets go against the wellbeing of citizens, the development of SMEs and small merchants, and could weigh on the economic recovery that is driving the digital transformation,” Asiet previously said in a statement.

BANKS

Meanwhile, Paraguayan banking association Asoban praised the bill, saying it would make Paraguay one of the countries with the most advanced legislation in the field.

“We call on the lower house to ratify the version [of the bill approved by the senate], the terms of which include high security criteria, supporting regulation for the benefit of users and ensuring the security of their data, their goods and their money, as well as of the entire system in general,” Asoban said in a statement cited by local paper La Nación.

The association also says that the bill “will not create major inconveniences” for users as “they will only have to identify themselves once, and all the rest of the development and validation would be under the administration of the entities stated by the law, with the necessary investments.”

The deputy minister of trade and industry, Pedro Mancuello made statements on Twitter backing the bill.

“Our initial position was to support high levels of security for all transactions," Mancuello said.

"Our position is to side with the central bank in allowing this to be regulated by the competent authority," he added.

The mobile money ecosystem in Paraguay has become a regional benchmark for financial inclusion, with successful cases such as Tigo Money, among others, becoming a template for launches elsewhere.

According to World Bank data, only 39% of the Paraguayan population is included in the formal banking system.

As early as 2015, Paraguay was already one of the 19 markets around the world with more mobile money accounts than bank accounts, and was the only one in Latin America, according to a report by the GSM Association (GSMA). All of the others are in Africa.