Chamber passes bill that regulates fintechs

This is an automated translation of the release from the Chilean finance ministry originally published in Spanish. 

Valparaíso, Wednesday, October 12, 2022.- By 136 votes in favor, the Fintech Law bill that seeks to regulate the market of companies that provide financial services through technological and innovative means, was approved in the Chamber of Deputies in its third parliamentary process so it is now ready to become law.

In the session, the Minister of Finance, Mario Marcel stressed that this project is part of the work of continuity between the previous government and the current one. “We consider that this was a suitable project, that it was going in the right direction, that it aimed to generate greater competition in the financial market, to stimulate innovation and to regulate this sector of the industry that was not regulated and, therefore, we support and we continue processing this bill with great enthusiasm,” he said.

Regarding the content of the initiative, he maintained that it seeks to promote competition and not favor a particular sector, and allow institutions other than traditional banks to compete for the provision of cheaper financial services to the public: “This is a project that is pro-competition, rather than in favor of a particular industry.”

It should be remembered that, in its first procedure, in the Chamber of Deputies the text was approved by 129 votes, and in the Senate it was ratified by 39 votes. In this second instance, the Executive branch formed a technical group in the middle of the year made up of advisers to Senators from the Treasury Commission and professionals from the Commission for the Financial Market (CMF). As a result of this work, 18 indications were presented from observations and recommendations of the table and different unions, which were unanimously supported.

The role of regulating fintechs will correspond to the Commission for the Financial Market (CMF). “The CMF is an institution that has given ample proof of its ability to safeguard the integrity and security of information. It should give everyone security regarding the functions that they will fulfill in the exercise of this law,” said the Secretary of State, pointing out that the CMF generally puts regulations up for consultation before issuing them.

The approval of this law comes to deliver, among other things, a clear regulation to Fintech companies that are currently providing services without regulation, which can generate risks for investors and customers. This industry has the potential to positively transform the financial industry by increasing financial inclusion and introducing more competition.

The modifications approved in Congress correspond to:

I. Reinforcement of data protection duties and prevention of money laundering. Expressed in the principle of proportionality and quality, and reinforcing the sanctions in case of violations of data protection and money laundering regulations, among others.

II. Strengthening of the regulation applicable to Fintec companies and symmetry with current legislation. The obligation for certain Fintec companies to report the balances in custody and intermediated transactions to the Internal Revenue Service was incorporated, with the support of the Fintec business association. Likewise, companies with a relevant role in financial inclusion were included, such as compensation funds.

III. Adjustments to the Open Finance System. It is recognized that certain payment business models will require regulation by the Central Bank, establishing a maximum term of 72 hours for payment to merchants. In addition, the criteria to be observed by the CMF when setting the thresholds that allow the exchange mandated by customers to be free were specified.