It is increasingly common for the financial sector to benefit from the growing development of new technologies. This has opened the door to the creation of the fintech sector , which refers to startups “that provide financial services through the use and implementation of technology and for this they use web pages, applications and social networks in order to speed up and simplify your care process “, as indicated by the CONDUSEF .
This type of emerging companies is on the rise because the financial sector is a very vertical sector and seeks to break with traditional banking structures. In other words, banks cover the majority of the market and the population demands more and better services, which makes room for the services offered by fintech companies . Today, Brazil is the Latin American country with the highest growth rate in the industry, with the creation of 380 startups in the fintech sector per year, followed by our country, with 273, according to the Inter-American Development Bank (IDB). .
From the above, the importance of the regulation that was recently approved in our country, the Law to Regulate the Financial Technology Institutions better known as the “Fintech Law” is derived. This law seeks to “regulate the financial services provided by financial technology institutions, as well as their organization, operation and operation and financial services subject to any special regulations that are offered or made by innovative means.” The interesting thing is that, although there are other countries with more regulation such as the United Arab Emirates or Singapore, the Mexican is the first in the world that covers all areas of regulation and is generally observed.
In Mexico, cash continues to be the most used means of payment; In this sense, only 14% of the population receives their salary through a bank deposit. However, 75% of the adult population of Mexico has access to smartphones and at least 50.9% of the population has an Internet connection, whether fixed or mobile ( ENDUTIH ). In this sense, the fintech sector finds important areas of opportunity in the payments and remittances market, loans, business finance management, personal finance management, crowdfunding (project financing), investment management, insurance, financial education and savings, scoring , identity and fraud solutions , and trading and financial markets, in accordance with the CONDUSEF.
In terms of economic policy, it should be considered that many of the innovations in the fintech sector , seek to reduce the interaction with banks and – indirectly – with the government, so there are still gaps in the regulations of this sector as is the leverage that is allowed to these institutions. On the other hand, there is still no qualifying institution that has the capacity to assure consumers of the liquidity levels or risks that the providers of these services have. This can generate market conditions similar to those that led to the mortgage crisis of 2007. In the event that high optimism arose, as it was with Bitcoin and other cryptocurrencies in 2018, leverage and credit availability would increase. A drop in the prices of these financial products can cause large losses if the bubble bursts. Further,if a company fintech announces its inability to solvency, the sector may suffer losses due to the distrust that is generated in the sector.
Also, because it is a newly created sector, there are still no insurers that offer insurance policies that fully cover potential losses of their clients. In this sense, fintech companies are more at risk when dealing with losses due to economic or criminal reasons, which would have an impact on their reputation.
In terms of security, although the tendency is for cyber attacks to be directed at large financial entities, these fintech companies may also be subject to attacks because their security systems – given the difference in company sizes – are less sophisticated than the first ones However, the aforementioned law contemplates the mechanism of action in the event of a cyber attack. As mentioned, cybersecurity is an area that must be constantly improving as cases of “hackers” that take advantage of the computer vulnerabilities of private entities to extort or monetize the information of victims or users of these organizations are widely known. Thus, fintech companies that offer better developments and innovation in the security field will have a competitive advantage in the fintech market .
Traditional banking and fintech companies can generate synergies that benefit consumers. On the one hand, traditional financial institutions enjoy a reliable reputation, which represents a constant source of customer flow. On the other hand, fintech companies have managed to create innovative tools such as fast, direct and low commission buying methods, which facilitates and increases the demand for financial products.
The Fintech industry presents great opportunities in a financial market that evolves and looks for new mechanisms to face the current needs. Good risk management undoubtedly represents an advantage when making decisions because – in a relatively new sector, formed by companies highly vulnerable to legal, security and financial issues – those that are better informed and prepared may act as the best before the challenges of developing a new market in consumers of financial products.
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