Grupo Aval CEO laments unfair competition between banks, fintechs

Grupo Aval Acciones y Valores SA CEO Luis Sarmiento Gutierrez lamented what he says is an unfair playing field for traditional lenders versus financial technology companies due to inconsistency in regulatory requirements.

"I [have] been an advocate for the longest time for doing away with the asymmetry in regulation that happens when you have a fintech competing against a bank," the executive said March 12 on a call to discuss quarterly results. "When the fintech is not regulated in terms of regulatory capital, how [it] takes deposits, in terms of cost of funds and quality of portfolios, it is not really a fair competition," Sarmiento Gutierrez added.

The race for market share in the Colombian banking industry has heated up since heavyweights in the regional fintech industry such as Brazilian digital lender Nu Pagamentos SA have set foot in the country.

Other Brazilian firms such as payment processor StoneCo Ltd. have shown increased interest in the Colombian market. Domestic banking rival Banco Davivienda SA and logistics company Rappi said they will also seek a banking license from the country's financial regulator.

"When someone announces they are [officially] requesting a banking license, I am the happiest person in the world, because it means that we are competing shoulder-to-shoulder," the CEO responded to an analyst's question.

Banks are "always thinking of how to invest the next dollar of capital, while a fintech is thinking about how much cash they can burn next month," he added.

"A little bit behind the curve"

Sebastian Gallego, an analyst at Credicorp Capital, had said that Aval seemed to be "a little bit behind the curve" compared to its peers when it came to digital strategy.

Sarmiento Gutierrez refuted the analysis, saying that its competitors might be misrepresenting their actual accomplishments in the digital space.

"I think that one of the ways that someone could make that statement is comparing [the number of] digital clients that we declare with the number that everybody else declares," Sarmiento Gutierrez said. "If you add up all the digital clients that anyone else claims to have, there are more digital clients than Colombians," he added.

"We [Aval] have 5 million digital clients who act and transact digitally," Sarmiento Gutierrez said.