The Impact of Decree 1692 of 2020 on the Payment Ecosystem in Colombia
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Four years after the enactment of the Decree 1692 of 2020 and its entry into force in December 2021, there have been significant changes in the electronic payment ecosystem in Colombia. The regulatory framework has facilitated the incorporation of new actors and technologies, resulting in a more dynamic and competitive market. These advances have not only improved the efficiency and security of transactions, but they have also expanded access to digital financial services for a larger number of Colombians.
These are the advances that the electronic payment ecosystem in Colombia has experienced:
4-part mechanism: beyond traditional duality
The decree transforms the traditional payment structure into a 4-part model, comprised of the issuer, the acquirer, the payer and the payee. This reorganization not only facilitates greater clarity in the responsibilities and rights of each party, but it also lays the foundations for a more competitive and dynamic environment, where multiple actors can participate and offer innovative solutions to end users.
Decree 1692 also brings with it important modifications to Low Value Payment Systems, delimiting the services they can provide such as clearing houses and the provision of other services. The standard defines that Low Value Payment System Administrators will not be able to acquire or become issuers, which led to a change in the business model of actors such as Redeban and Credibanco in the payment ecosystem. However, these entities can act as payment service providers for purchasers and issuers. This approach ensures that, although Low Value Payment System Administrators are not directly involved in the acquisition or issuance, they can still play a crucial role in the payment infrastructure, offering essential services that facilitate transactions.
Open access to payment systems: an approach focused on non-exclusivity
The decree clearly states that “low-value payment systems, issuing, acquiring and receiving entities and their payment service providers may not arbitrarily block the processing and management of payment orders or fund transfers from other participants in the same payment system. In addition, they will refrain from agreeing to exclusivity in the provision of their services.” This mandate not only guarantees equal access to the payment system, but also reinforces the spirit of competition and collaboration between different market agents.
Fostering Competition and Innovation
One of the most notable changes of Decree 1692 is the creation of the figure of unsupervised purchasers. This figure allows new players to enter the market who, although not under the direct supervision of financial authorities, must comply with certain regulatory requirements to ensure the security and reliability of transactions. This legislative change opens the door to fintechs and other technology companies that wish to offer acquirer services without the same obligations as traditional purchasers, encouraging the gradual entry of new players and urging traditional actors to promote innovation.
The regulation also opens up important space for new players, such as payment service providers, to enter the market with advanced technological proposals. This regulatory framework encourages companies to develop more competitive and technologically updated solutions, contributing to a digital transformation in the payment industry. The competition generated by the entry of these new actors not only drives the continuous improvement of existing services, but also encourages the emergence of innovations that can redefine the way in which Colombians carry out their daily transactions.
“These regulatory changes have extended to different Latin American jurisdictions such as Mexico, Chile, Argentina, Peru and Ecuador, among other countries, which continue to seek to update their regulations to respond to the needs of innovation and change in the current payment ecosystem and the needs and preferences of financial consumers, following the example of Brazil, a market in which these market-opening actions began just over 10 years ago” —
The market has opened doors to new processors at all ends of the payment ecosystem, from issuance to acquisition. For example, on the issuance side, fintechs developing virtual credit/prepaid card solutions can now integrate more easily with banks and other financial institutions, offering end users more agile and personalized options. On the acquisition side, technology companies that operate as payment processors can enter the market with innovative payment gateway or cloud processing solutions, streamlining transactions for merchants of all sizes, which has allowed a greater number of small and medium-sized businesses to accept digital payments, thus boosting financial inclusion in the country.
The decree also establishes clearer and more flexible conditions for those interested in operating as purchasers in the country. Companies that meet the established criteria will be able to obtain authorization to operate, which facilitates the entry of new players into the market and promotes a more competitive environment. This more inclusive and dynamic access has the potential to transform the payment industry in Colombia, allowing more companies to offer specialized services and improve the user experience.
A step towards modernizing the payment system
The issuance of Decree 1692 of 2020 represents a significant step forward in the modernization of the payment system in Colombia. By establishing a regulatory framework that promotes competition and empowers new actors, a more inclusive and innovative environment is being fostered, where both consumers and businesses benefit from greater options and better services. Akua celebrates these advances and remains committed to supporting the evolution of the payment ecosystem in the country, offering cutting-edge technological solutions that respond to new market demands.
This regulatory change not only boosts the growth of the sector, but also positions Colombia as a benchmark in the region in terms of modernization and development of financial infrastructure. The openness to new actors, such as payment service providers, seeks to generate greater competition and technological updating, making the Colombian payment ecosystem at the forefront of global innovation.