Four years after the promulgation of Decree 1692 of 2020 and its entry into force in December 2021, significant changes have occurred in the electronic payments ecosystem in Colombia. The regulatory framework has facilitated the incorporation of new players and technologies, resulting in a more dynamic and competitive market. These advances have not only improved the efficiency and security of transactions, but have also expanded access to digital financial services for a greater 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-party model, composed of the issuer, the acquirer, the payer and the beneficiary. This reorganization not only facilitates greater clarity in the responsibilities and rights of each party, but also lays the foundation 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 that these can provide as clearinghouses and the provision of other services. The rule defines that the Administrators of Low Value Payment Systems may not carry out the activity of acquiring or being issuing entities, which generated 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 acquirers and issuing entities. This approach ensures that, although the Administrators of Low Value Payment Systems are not directly involved in acquiring or issuing, they can still play a crucial role in the payment infrastructure, offering essential services that facilitate transactions.
Open Access to Payment Systems: A Focus 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 handling of payment orders or funds transfers from other participants in the same payment system. They shall also 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 the different market players.
Promoting Competition and Innovation
One of the most notable innovations of Decree 1692 is the creation of the figure of unsupervised acquirers. This figure allows the entry of new players into the market who, although not under the direct supervision of the financial authorities, must comply with certain regulatory requirements to guarantee the security and reliability of transactions. This legislative change opens the door to fintechs and other technology companies that wish to offer acquiring services without the same obligations as traditional acquirers, encouraging the gradual entry of new players and urging traditional players to drive innovation.
The regulation also opens up a significant space for new players, such as payment service providers, who can enter the market with advanced technological proposals. This regulatory framework encourages companies to develop more competitive and technologically up-to-date solutions, contributing to a digital transformation in the payments industry. The competition generated by the entry of these new players not only drives continuous improvement in existing services, but also encourages the emergence of innovations that can redefine the way Colombians carry out their daily transactions.
“These regulatory changes have spread to different jurisdictions in Latin America such as Mexico, Chile, Argentina, Peru and Ecuador, among other countries, which continue to seek to update their regulations to respond to the needs for 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 a little over 10 years ago” —Lina Oviedo , Head of Legal at Akua and regional expert in payment methods.
The market has opened the doors to new processors at all ends of the payment ecosystem, from issuing to acquiring. For example, on the issuing side, fintechs developing virtual credit/prepaid card solutions can now more easily integrate with banks and other financial institutions, offering end users more agile and customized options. On the acquiring side, technology companies operating as payment processors can enter the market with innovative payment gateway or cloud processing solutions, streamlining transactions for merchants of all sizes, which has enabled a greater number of small and medium-sized businesses to accept digital payments, thereby boosting financial inclusion in the country.
The decree also establishes clearer and more flexible conditions for those interested in operating as acquirers in the country. Companies that meet the established criteria can obtain authorization to operate, which facilitates the entry of new players into the market and fosters a more competitive environment. This more inclusive and dynamic access has the potential to transform the payments 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 enables new players, a more inclusive and innovative environment is being fostered, where both consumers and businesses benefit from greater options and improved 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 opening to new players, such as payment service providers, is intended to generate greater competition and technological updating, ensuring that the Colombian payment ecosystem is at the forefront of global innovation.
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