Fitch: Mexico Fintech Law Could Mitigate Operational Risks

4/10/2017 Reuters

(Fitch) Mexico’s draft financial technology (fintech) regulation law, if passed, has the potential to reduce operational risk, enhance transparency and improve security for borrowers and lenders over time, according to Fitch Ratings. The fintech law, which was distributed by the regulator to select industry participants for discussion in March 2017, could mark a step forward in developing a comprehensive regulatory framework for the sector. Furthermore, it has the potential to alter the competitive landscape and broad market dynamics over the medium-term qualitative aspects that Fitch uses when assigning ratings based on the banks’ intrinsic profile. These changes would have implications for banks and nonbank financial institutions (NBFIs) that have been increasing their exposure to fintech firms through equity investments, joint ventures and participation in start-ups. Fitch believes Mexico has significant growth opportunities for fintech considering the country’s large size, high rate of penetration of mobile phones and internet and substantial unbanked population. The proliferation of fintech firms reflects this. Mexico has among the largest fintech sectors in Latin America, including around 150-180 start-ups that focus on a wide range of services including payments and remittances, crowdfunding, marketplace lending and financial management. Traditional banks and NBFIs have also recognized the potential growth opportunities through fintech and have been increasing their participation in the sector.

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