The newly approved financial technology law in Mexico is credit positive for local banks, as it sets a clear set of rules for fintech companies which promotes a level playing field with banks, Moody's said March 8.
The law covers crowdfunding companies and electronic payment platforms, which will be considered as a new type of legal entity called financial technology entities, or ITFs. Banks will be allowed to invest in these entities, a positive development for banks such as Grupo Financiero BBVA Bancomer SA de CV and Banco Ve por Más SA Institución de Banca Múltiple Grupo Financiero Ve por Más which have made inroads into fintech, Moody's said.
Allowing both banks and ITFs to operate "innovative models" under the supervision of regulatory sandboxes will enhance innovation and investment in new technologies, the rating agency said. Virtual currencies will be recognized under the law only as a means of exchange, and thus reducing systemic risks and speculative opportunities, Moody's noted.
Some of the benefits banks could get from the new law include enhanced online platforms that improve customer service as well as a reduction in operating costs and brick-and-mortar operations.
The law will also aid in the growth of financial intermediation in the country, with crowdfunders providing alternative lending options for millennials and underbanked sectors. Crowdfunders will be ordered to report the credit information of their clients to credit bureaus, which will help advance financial depth in the country, Moody's said.
However, Moody's expects banks to continue dominating lending and payment services through digital channels. Although the law will improve transparency, banks will not focus on the higher-risk market segments and fintechs will complement banks instead of competing with them, the rating agency added.
The fintech law will include norms such as minimum requirements for capitalization and liquidity and provisions related to investor and user protection, anti-money laundering and data management. The law is awaiting the final approval of Mexico's president.
