Topics

• Main Fintech trends for 2021.
• Modification of the investment policy of the pension funds administrators.
• Investment regime of companies specialized in deposits and electronic payments – SEDPE-

MAIN FINTECH TRENDS FOR 2021

The Colombian Association of Fintech Companies (Colombia Fintech) published a document in January, which reports the trends expected in 2021 for the Colombian market in terms of Fintech.

According to the foregoing, we underline the most relevant points of such document, exposing, additionally, which of these have been materializing in our market during this year:

1. Neobanks:

Neo-banks are banking entities that do not have physical offices. They have different channels that allow transactions to be carried out, mainly through applications.

In connection with these new players within the financial system, we can highlight the entrance into operations of Lulo Bank S.A., whose authorization for initiating operations was given by the Financial Superintendence of Colombia (SFC) through resolution 542 of June 10, 2021.

Likewise, it is expected that this year the neo-banks Nubank and Rappipay will be authorized to enter into operations by the SFC.

2. Artificial Intelligence:

Artificial intelligence (AI) has a broad application in Fintech´s ecosystem in the creation of tools to automate or streamline processes.

We remark, as an example of the applications in the Colombian market of the AI, tools such as BBVA´s chatbot, which works on the BBVA`s website and exceeds two million interactions; and Davivienda S.A. who launched new lines of credit to be managed from the cell phone and have a response on their approval in a matter of minutes.

3. Crowdfunding and its different modalities:

Called by Colombian legislation as Collaborative Financing, it is expected that, in 2021, it will play a major role in the reactivation of different productive projects and companies affected by the economic crisis generated by the pandemic.

For that purpose, the authorities have issued Decree 1235 of 2020 and External Circular 014 of 2021, seeking to generate attractive conditions, for both investors and entities, for the performance of crowdfunding.

As a materialization of such a trend in our market, we highlight the starting of operations of A2censo platform in the Colombian Stock Exchange.

4. Blockchain:

On the part of Colombia Fintech, it is analyzed that by 2021, following the global trend, the use of this technology will increase, consolidating itself as a beneficial tool for the financial system.

Regarding this topic, the SFC in its controlled environment called “laArenera” has carried out the following pilot projects using the technology in question:

• Pilot test to issue bonds with blockchain technology and smart contracts, in which entities such as Banco Davivienda, IDB Group, and Banco de la República participate.
• Pilot project to carry out tests of operations with deposit financial products on behalf of crypto assets platforms. Currently, the Movii-Bitpoint alliance is operating and is expected that eight additional alliances will start operations during this year.

MODIFICATION OF THE INVESTMENT POLICY OF THE PENSION FUNDS ADMINISTRATORS

Through Law 2112 of July 29, 2021, the Colombian Congress, to encourage entrepreneurship through the strengthening of private equity funds, decided to modify paragraph 2 of Article 100 of Law 100 of 1993, for purposes of including the following amendments:

• At least 3% of the resources managed by pension fund management companies, must be invested in private equity funds (FCP) that have, within their investment policy, to participate in Colombian companies or productive projects in Colombia.
• Investment in funds that, in turn, invest in FCP, known as “Funds of Funds”, will also be considered as an investment in Colombian companies or productive projects in Colombia.
• However, the following will not be considered for the calculation of the minimum investment percentage:
  • Investments in extractive companies in the energy mining sector.
  • Investments in companies economically linked to pension funds managing companies or belonging to entrepreneurial groups, or financial conglomerates of these institutions.

Additionally, the FCP will be obliged to certify and quarterly report to the Financial Superintendency of Colombia the strict compliance with its regulations.

Likewise, it was established that the minimum investment percentage referred must be obtained within the following two years as of the entry into force of this Law (July 29^th, 2021).

INVESTMENT REGIME OF COMPANIES SPECIALIZED IN DEPOSITS AND ELECTRONIC PAYMENTS -SEDPE-

Through opinion 2021052157-009 of June 16, 2021, the Financial Superintendency of Colombia (SFC) clarified some topics in connection with the investment regime that SEDPEs can carry out within the framework of their capacity as Exchange Market Intermediaries (IMC).

According to the foregoing, we share the most relevant points of the referred opinion in the following terms:

1. Regime of the Limit of foreign currency proprietary Position:

Even though the Bank of the Republic decided to authorize the SEDPE to act as IMC, providing them with the possibility of making investments in foreign currency, the SFC, through the opinion, clarified that, under External Resolution 1 of 2018 in its article 20°, the SEDPE are excluded from the application of the regime of the foreign currency proprietary position.

As a result of that exception, the position that SEDPE assumes in foreign currency is not subject to the provided limit for the foreign currency proprietary position. The limit consists in an arithmetic average of 3 business days of the IMC’s foreign currency position may not exceed the equivalent, in foreign currency, of 20% of the entity’s technical equity, nor may it be less than (-5%).

2. Treasury Investments:

Concerning treasury investments, namely, all those included in account 13 of the Single Catalog of Financial Information for Supervision Purposes of the SFC, it was clarified by such entity that they are subject to the instructions contained in Chapter IV, Title V, Part II of the Basic Legal Circular (CBJ), therefore, based in the referred regulations SEDPES should manage and control the exposition to the market risk.

3. Duty of Information on Market Risk Matters:

Regarding this point, the SFC clarified that the SEDPEs are not obliged to file periodic information related to market risk to the SFCs.

However, if a SEDPE constitutes an investment or financial derivatives portfolio, it is necessary to design, adopt and implement a Market Risk Management System (SARM) that allows them to identify, measure and monitor such risk. Likewise, they must meet the requirements that are made by the SFC concerning SARM.

Authors: Carlos Carvajal I [email protected] I Financial Law / Daniel Manrique I [email protected] I Financial Law