This document discusses regulatory initiatives in financial technology (fintech) in Latin America and the Caribbean (LAC). It covers the definition and history of fintech, its potential impacts, and key regulatory challenges and responses. Fintech is defined as technological change in how business and financial activities are conducted. Key challenges for regulators include the fast pace of innovation, lack of experience among some fintech firms, and ensuring an appropriate regulatory balance between objectives like consumer protection and market growth. The document recommends approaches like regulatory analysis, innovation sandboxes, global standards, and building supervisory capacity to help address these challenges.

1. Regulatory Initiatives in the LAC
Regulatory Challenges and Responses
Werner Bijkerk
Simplexxis
First meeting of the Fintech Ecosystem Network
8-9 April 2019
Panama

2. Simplexxis
Simplifying Regulatory Problems Improving Regulatory Effectiveness
Strategy Analysis
Training Coaching

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Financial technology: definition
“Change brought about by the rapid proliferation of
technology into how business, processes and activities are
conducted.”
“Digital disruption can be about ‘game changing’ technology
and also the impact of small accumulative changes.”
Different speed of technological penetration:

4. Financial technology: history
Era Fintech 1.0
1866-1967
Fintech 2.0
1968-2008
Fintech 3.0
2008-now
Fintech 3.5
2008-now
Geography Developed world Global Developed world Developing
world
Key players Infrastructure Banks, brokers,
exchange
operators
Startups and
Bigtech
Startups and
Bigtech/Telcos
Shift origin Globalization of
financial services
Technology:
digitalization of
finance
Financial crisis Market structure
Instruments Cable,
telephone, telex
ATM, SWIFT,
Nasdaq, Algo
trading,
Bloomberg
Paralization of
incumbents;
data-driven and
platform-based
Leapfrog into
mobile-based,
convenience
seeking people 4
Source: Arner et al.
Stages of financial technology

5. Financial technology: impact
Fintech could help alleviating bad financial health of:
• Hundreds of million people with no access to basic financial services.
• Tens of thousands of small enterprises with no access to credit.
And, by doing so, boost economic growth and welfare.
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6. Financial technology: impact
Specialization in product/services segments:
- Investments: robo advice, AI/algo run quasi-ETFs
- SME finance: crowdfunding & Initial Coin Offerings
- Personal finance, mortgages: crowdlending
- Payment services: digital platforms, blockchain
Specialization in business operations:
- Calculation-risk management
- Voice recording
- Trading of less liquid markets: automation
- Settlement, corporate actions etc: blockchain, smart contracts
- Cyber protection
- Regulation-regtech
Horizontal unbundling
Ver
tical
un
bun
d
ling

7. Financial technology: impact
investor
broker mutual fund
bank pension fund insurer
securities market
securities
banking products
participat
ions
stocks
bonds
participations
and insurance
custody
settlement
clearing
firm
pension
plans
government
bonds
payment

8. Financial technology: impact
Loss viability
business model
Procyclicality
Concentration
Operational
Competition
Efficiency
Transparency
Diversification
Adoption
‘Incumbents’
Fragmented
‘Fintech’
‘BigTech’
Inclusion
Benefits Challenges
Regulation

9. Financial technology: regulatory balancing of
objectives
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Investor
Protection
Market
integrity
Financial
Stability
Basic
Safety
Nurturing
Industry
Supporting
Market
Efficiency
Supporting
Growth

10. Regulatory complications
• International transactions: legal terms
• Lack of global standards
• Lack of harmonization in regulatory approaches
• Still early in the game for full regulatory regime: not yet passed a full
credit cycle of boom and bust
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11. Identification of regulatory issues
Identification of issues and analysis:
• Market changes go fast and spread fast globally
• Many new operators/fintech innovators have no finance background, less aware
of regulatory standards and norms – high risk of “wild west”
• Technology propensity to lock-in and create insiders and outsiders
 Market intelligence & research
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12. Balancing regulatory actions
• Regulation propensity to rule in and rule out; don´t throw the baby out
with the bathwater
• Sometimes rule-based setting minimum standards;
• Sometimes principle-based setting flexible standards
• Global standards
• Innovation rooms
• Sandboxes
• Maintain regulatory level playing field
 Careful regulatory analysis and balancing intervention
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13. Ensuring regulatory prevention
• New parts of population reached, with no experience in finance  risks of
over-crediting, overly risky investments
• New firms reached, with less expertise in finance and governance  risk of
failures
• Many new operators/fintech innovators have no finance background, less
aware of regulatory standards and norms  risk of non-compliance & harm
• International supervisory cooperation in cross-border services and products 
risk of unregulated services and products
• Risk of regulatory race to the bottom
• Risk of regulatory arbitrage
 Design and promote information standards, education,
supervision, cooperation
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14. Building regulatory and supervisory capacity

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Develop monitoring capacity

16. Develop data and analytic capacity

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Be on top of the game!

18. Thanks!
Soon available:
Werner Bijkerk
The Foundations of Financial Regulation
www.simplexxis.com
werner@simplexxis.com
wernerbijkerk@hotmail.com
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