On Sunday, September 8, Matías Valenzuela was featured in the “Emerging Talent” section of Economía y Negocios in El Mercurio, where he highlighted the importance of collaborative work between fintech companies and industry regulators, ensuring that new regulations and standards serve as catalysts for innovation and competition, rather than as barriers:
“The rise of fintech in Chile has transformed access to financial services, democratizing banking and offering innovative solutions. More than half of fintech companies in the country focus on digital payments, financial management, and lending. These startups have succeeded in reaching sectors traditionally excluded from the financial system, providing speed, efficiency, and lower costs. However, this progress brings regulatory challenges that companies must strategically address to ensure their long-term sustainability.
While innovation has facilitated access to financial services, it does not eliminate the risks that justify regulation. The risk of contagion between financial entities, along with personal data protection and cybersecurity, are ongoing challenges that require a solid regulatory framework. The Chilean Fintech Law and the new regulations from the Financial Market Commission (CMF) are aligned with this, promoting financial inclusion and fostering innovation and competition, while protecting the integrity of the financial system.
There are several examples of fintech companies that have faced regulatory challenges and managed to establish themselves as industry leaders. In the U.S., PayPal navigated complex administrative procedures to obtain its license in different states, which enabled it to establish a new system for digital payments and transfers. In the UK, Revolut optimized its processes after undergoing a strict audit of its anti-money laundering compliance standards, facilitating its international expansion. In Brazil, Nubank worked closely with regulators to offer innovative financial services, such as digital accounts and no-fee cards, in a market dominated by traditional banks. Even Visa and Mastercard, in their early days, faced numerous challenges in getting their card payment model accepted in a world accustomed to cash. These cases highlight the importance of adopting a proactive and adaptive strategy towards regulation for success in the fintech sector.
Regulation provides fintech companies with the legitimacy needed to gain the trust of the public and investors, but it also entails significant costs. Adapting to this new regulatory framework is essential to remain competitive, striking a balance between compliance and innovation. As it is not possible to comply with all regulations from day one, companies must adopt a strategy that prioritizes regulatory requirements according to their specific circumstances, focusing on critical and essential areas for the startup, operation, and initial growth of the business.
On the other hand, it is essential for regulators to adopt an agile approach that allows fintech companies to operate efficiently and effectively. The speed in processing authorizations and permits is crucial to prevent administrative processes from turning new regulations into insurmountable obstacles. Regulators must ensure consumer protection and the integrity of the financial system without hindering the innovation that drives financial inclusion and economic efficiency. By working collaboratively, regulators and regulated entities can ensure that the new fintech regulations act as a catalyst for innovation, not as a barrier”.
