How the QR code system has reshaped the financial sector

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By Alejandro Scasserra

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Digital banking expert

The growth of the fintech sector has been brutal. Between 2020 and 2022, employment in this sector virtually doubled to nearly 30,000 jobs. All this, despite the crisis. Argentina is one of the most successful cases in what has to do with the development of the financial innovation industry. This can be clearly observed in companies of domestic origin that are successful in our country and abroad.

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However, this is not an isolated phenomenon: all over the world, technology-based financial companies are growing at an exponential rate. In most, if not all, countries, the debate between banks, fintechs and regulatory bodies has been present.

In China, for example, e-commerce platform Alibaba launched Alipay in 2004, leveraging its huge user base. Tencent Group did the same years later through its WeChat product, launching WeChat Pay. From 2012, both companies offer QR payments, becoming one of the preferred means of payment in that country.

In general, Chinese banks have seen fintech companies as an opportunity to innovate and improve their online financial services, rather than an existential threat. Chinese regulators have adopted an attitude of support and promotion of innovation and competition in the financial sector. However, that doesn’t mean that the rules of the game shouldn’t be the same for everyone.

In Europe there is a fairly common joke that says: “America invents it, Asia produces it and Europe regulates it”. In the case of financial innovation, it is no exception. In 2018, given the emergence of the fintech phenomenon and the need to standardize payment services, the European Union issued the famous “Payment Services Directive 2”known as “PSD2”.

This standard has provided a regulatory framework for fintechs and the growing phenomenon of open banking. It also expanded central banks’ ability to supervise financial institutions, the latter having to seek permission from the regulator to perform certain activities.

Another paradigmatic case in Europe is that of Bizum, in Spain, the immediate payment platform created by the main banks of the country to face the threat of the growing fintech phenomenon. The curious thing about Bizum is that it was born as an initiative to promote online operations between banks; however, they have already started incorporating fintech. For example, since September 2022, the N26 digital bank has joined this network. Bizum already exceeds 25 million users.

The United States is a special case. The conflict between banks and fintechs has been more complex and protracted than in other countries, due to the highly regulated nature of the financial sector and the strong presence of large traditional banks. However, the United States is the birthplace of the main BigTechs, and also of some of the most important fintechs in the world.

In recent years, the advance of major technology companies such as Apple, Google, Amazon and most recently Twitter, towards financial services. Similarly, fintech giants like Paypal, Chime and Stripe They have positioned themselves on a global scale, and this worries the big US banks.

As for global regulatory projects in the region, we have the case of Mexico in 2018 and Chile in 2022. Both countries have passed their own fintech law, in which they ask the regulator to approve companies that comply certain standards.

Opinions are divided on the issue. Many argue that the law has established clear rules and fostered collaboration between banks and fintechs. Others argue that the regulator’s delays in approving projects and the failure to update the standard are causing the development of the sector to halt.

Finally, there is the case of Brazil. The PIX initiative was launched in 2020 It has become a global example for the development of innovation in instant payments and the integration of banks and fintechs. There have been some objections from some players regarding the implementation costs and low fees that the system seeks to implement, but ultimately it has encouraged collaboration between the different players.

Source: Clarin

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