Subject:
Economy
Ecuador's Monetary Policy and Regulation Board delimited the role of the central bank in the payments environment, in order to put the house in order and create a more attractive investment environment.
The Monetary Policy and Regulation Board (JPRM) approved a resolution that resolves the doubts existing among participants in the national payment system regarding the competencies ofeach regulatory body. It also clarifies the operational scope of electronic wallets.
Resolution No. JPRM-2024-018-M (which repeals last year's Resolution No. JPRM-2023-014-M) indicates that all payment services will be authorized by the Central Bank of Ecuador (BCE), a step that puts an end to the confusion that prevailed when applying for the permit.
In this regard, Luis Lucero, senior associate at the law firm Spingarn, considers that the change favors the market because there is more "legal certainty, transparency and a north to go towards. That is to say, having clarity as to who each participant will be accountable to.
Article 6 of the resolution mentions that "electronic means of payment will only be operated by the ECB and by the participants of the Auxiliary Payments System (SAP), in accordance with the authorization granted by the central bank". The repealed resolution indicated that the entities of the national financial system could also participate in this process, which in practice led to a clash of functions between entities that affected regulatory compliance for companies.
"This change marks an important milestone: Ecuadorian or foreign fintechs that want to start up in Ecuador will have a clearer panorama and a more attractive environment for more competitors to arrive. And with more competitors, the market regulates itself, with many more benefits and options for end users," explains Lucero.
Lucero, who worked at the Superintendency of Banks (SB), recalls that the institution used to receive numerous queries from foreign payment services companies to clarify whether or not they had to have the Superintendency's permission to operate in the Ecuadorian market. Faced with the lack of clarity, these businesses "ended up qualifying before the SB, but in a rather lengthy process that took from six months to a year," he explains.
The situation created quite a heavy compliance burden, especially for smaller fintechs that sought to be gateways, aggregators or e-wallets, "but not for those that were attached to an entity and enjoyed a financial muscle of resources and could keep up in the process," says the expert.
News for digital wallets.
The resolution also clarifies and broadens the concept of the services that digital wallets can provide, considering that they allow: "their users to make payments, collections, transfers, send and receive financial drafts and remittances in real time".
There are no changes as to who may provide the wallet service or operate with the same. The regulation maintains that they may be the specialized companies of electronic deposits and payments (SEDPES), financial entities and auxiliary services of the financial system.
However, the functions of the SEDPES have been expanded to include remittances and not only the reception of remittances.
In addition, these companies may now provide the same services established for participants of the Auxiliary Payment System (SAP), as long as they are authorized by the central bank.Currently, SAP participants may perform payment aggregation, payment gateway, electronic means of payment processing, transactional switching for payment services, money remittances, collection of public funds and clearing.
Another change is that the Central Bank may "extinguish" the authorization of a SEDPE in the event that it fails to comply with some of the requirements or for offering unauthorized services. Previously, this power was more limited.
On the other hand, the resolution modified the time period for the review of applications by the ECB, which was previously two weeks, by extending the review of the authorization by the ECB by up to 30 days. In the event of non-compliance with the requirements, these must be corrected within ten days, which was previously two weeks.
It is also specified that those who provide the wallet service will be able to do it themselves or through third parties, which is interpreted as a discreet approach to the Banking as aService (BaaS) model in Ecuador. To this end, greater measures are added in terms of transaction security, making the identification of suspicious patterns mandatory.
In fact, it is emphasized that privacy and information security criteria should be added in the contracts between banks and fintechs to offer the digital wallet service.
Payment initiation and interoperability
As for SAP participants, Lucero explains that the payment initiator activity has been removed from the list of services. "I don't know the reasons [for its exclusion], but I consider that the payment initiator was already obsolete, when today there are already more complete solutions, such as a payment gateway that can include it and add other inherent services," he says.
Finally, regarding payment interoperability, the new regulation mandates mandatory adherence to the scheme for SAP participants (financial entities, financial system auxiliary services entities, neobanks, among others), and indicates that the JPRM and the ECB will present roadmaps and strategies focused on its development.
However, the lawyer believes that "there is still no clear position as to what is going to be the
participation mechanism, the role of the central bank, whether the interoperability platform will be centralized in the central bank or only under a regulator of the players".
In March of this year, the JPRM and the Central Bank presented a proposal for payment interoperability that sets out the requirements and conditions to be met by SAP participants.the project was in public consultation until mid-April, but since then there have been no new pronouncements on the matter. Even so, Lucero estimates that the regulation could be published by the end of this year.
KEY DATA
- The board's decision also extends the range of operations that digital wallets can offer.
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