Fintech institutions in Mexico: regulations
Due to the operations in which Fintech institutions are engaged, regulation is oriented to their activities and their purely technological operation.
Fintechs are not currently allowed to raise funds from the public, so their regulation is lighter.
According to the Mexican government, banks are authorized to capture funds from the public and operate with the payment system, which is why they are regulated according to the principles of protecting users’ assets and the country’s financial stability.
Given their systemic importance, regulation largely follows the principles established in the Basel framework.
Financial Technology Institutions (FTIs) and other institutions, such as banks, have different regulatory regimes by virtue of their different legal nature.
Above all, multiple banking institutions and development banking institutions are regulated by the Law of Credit Institutions (LIC) and the General Provisions Applicable to Credit Institutions (Circular Única de Bancos).
The purpose of these regulations is to regulate banking and credit services, the organization and operation of credit institutions, the activities and operations they may perform and the protection of the public’s interests.
In this regard, Article 10 of the LIC and Article 336 of the Sole Banking Circular set forth the requirements that must be met for the organization and operation of an institution, which, in turn, must be approved at the discretion of the National Banking and Securities Commission (CNBV) and with the favorable opinion of Banco de México, in terms of Article 8 of the LIC.
Likewise, within these two instruments it is also possible to provide for the transformation of the organizations or their operation, as well as their dissolution.
On the other hand, FTTs are regulated in the Law to Regulate Financial Technology Institutions, or Fintech Law, and in provisions mentioned in the first question, which seek to establish a general framework for the authorization and supervised operation of FTTs, imposing prudential rules proportional to the risks they represent in different matters, such as financial, operational, market, technological (cybersecurity), corporate governance and accounting rules.
In this sense, these institutions differ from those belonging to the banking sector, from the way in which they must be constituted, the authorization to operate, to the operations they can carry out.
Article 11 of the Fintech Law determines that, in order for an entity to be organized as an FTT, it must obtain authorization from the CNBV, with the prior agreement of the Inter-Institutional Committee, i.e., the CNBV, the Ministry of Finance and Public Credit and Banco de México.
On this line, the two figures that operate in the market through this regulation are the Collective Financing or crowdfunding Institutions and the Electronic Payment Fund Institutions.