The brake on financial innovation in the Banking Convention

I was for the first time at the Banking Convention organized by Asobanking (Association of Banking and Financial Institutions of Colombia). I have always been more on the side of fintech technology and business development and not so much in touch with how power moves in Colombia, but I had no doubt that this convention was a thermometer of the tension in the country.

Vicky Dávila attacked the government and received a long ovation from the financial sector; the leaders of the political opposition expressed great concern about the lack of messages of trust from the government; the congressmen showed their differences live; the Minister of Finance showed that the country will grow little despite the projections; the financial sector showed how tight it closed last year and the risks to the future of an unstable situation; President Gustavo Petro was emphatic that in order to move forward it needs lower rates; among many other things that came out of the convention.

In other words, we are in a difficult time, there is no doubt about that.

However, the convention closed with a conciliatory message in all that upheaval: harmony between banks and the government at an economically difficult time for the country. A kind of pact in which they were going to try “little by little” for the sake of Colombia's fiscal future and that they would find solutions together.

While that's happening, in the fintech industry, we're only thinking about how to move forward with regulations to give more space to the innovative industry.

The government and the fintech industry are making progress in three regulatory changes that could completely transform the financial sector: the implementation of open finance, the implementation of an immediate payments system and the regulation of blockchain technology.

• The Immediate Payments System It is a child of the Petro National Development Plan and is basically the creation of technological rails that are at the service of the population so that they can make immediate payments between entities. Eliminate barriers in order to complete cash transactions as much as possible. In Brazil, with PIX, they practically finished it and the same thing happened in India with UPI.

• Mandatory open finance were approved in the National Development Plan and the Financial Superintendency is regulating the issue, he says it is his star project, but exactly how it will work has not come to light. What is it about? It's very simple: that the owners of financial data are the users and that financial institutions, banks and fintechs fight for customers by offering the best rates and opportunities.

• The regulation of blockchain technology seeks that the rules imposed on the crypto industry are neutral and do not affect an industry that is not financial and that does not need to be monitored, but there has been no political will for this to be achieved. The Congress overthrew the project that advanced to the third debate last year and neither the Super, nor the Treasury, nor the Banco de la República wanted to move forward. We are practically at zero even though the idea of the project is already consolidated. Rules are needed, but they are neutral for the industry.

These are three advances that seek, in essence, to give space to non-traditional players because they encourage competition and deepen the objective of fintechs to the maximum: to ensure that more people have access to financial services and to close gaps in that regard.

The problem is that these are issues that generate fear in the most traditional sectors and that could give a profound turn to the financial sector: because traditional entities could lose customers. This is because neobanks or other fintechs can provide better services to users, because immediate payments in a public system could take business away from rails that already exist, such as ACH, Credibanco, Redebán or Transfiya, which are managed by traditional banks. Or, because blockchain technology could completely revolutionize a country's entire monetary policy.

Although these are difficult issues, Colombia's regulatory pressure, technological and access needs have made these aspects on the government's agenda. Even this has been open to regulatory changes to the extent that they have been proposed as alternatives for a highly informal and unbanked population. Fintech has a very powerful social component.

But in a distressed country, where the government and traditional banks send a message of a pact in favor of economic reactivation, there would seem to be no room for innovation or for fundamental progress with these issues. And it's not that it's an easy task and it's not about harming traditional banking, but in other parts of the world, innovation is what has forced traditional systems to update and adapt, through regulatory channels.

I hope I'm wrong and that the government throws the gas into these issues and sees them as an opportunity for economic recovery. Sometimes those of us who work in technology don't understand the times of politics or public policy makers, but we do think we know where we should go as a financial industry.

Bonus track. The only beacon of light with hope is the draft decree that was recently released by the Financial Regulation Unit on the Immediate Payments System, which was a surprise for traditional banks because, in a nutshell, it forces them to set up the system and promote it. Surely the banks are going to object, we'll see if they do it publicly or privately.