Costa Rica: Fintech: legal challenges in Costa Rica and the region
For the past two decades, technology has permeated the financial services market. Developing countries such as Costa Rica and its neighbours are being favoured by these emerging fintech startups. Entrepreneurs are focusing on developing financial tech tools in areas such as lending, payments, alternative scoring, data management, digital banking, personal finance management and crowfunding in order to offer a varied and accessible range of services for different market segments.
These ventures are helping to expand different channels for the unbanked to reach financial inclusion. The smartphone operating platform is being increasingly used by consumers in rural locations to access banking services in an easier way. At a basic level, people will be able to shift from long-standing, inaccessible bank services to innovative and competitive products.
In many cases, this innovation faces regulatory challenges and gaps that the region must overcome to be able to get the most out of these new opportunities. In our view, regulators should lead the effort on the proposals of modern regulations that adapt the existing ones to the new technologies and to the opportunities they present. Some legal actions include: a) an advanced monitoring and analysis of technological platforms in the market, including ex post and ex ante regulation; b) the encouragement of regulatory sandboxes that allow the testing of new financial products and/or services based on new technologies; c) adequate regulations to incentive the creation and perfection of blockchain-based financial services, including smart contracts, contract management and personal record systems; d) the creation of public policies that contain the necessary elements and tools to promote digital economy; e) a review of the current tax regime to explore potential incentives for fintech entrepreneurs; and f) the creation of specialized and agile legal mechanisms to resolve potential conflicts.
We hope this technological disruption will be a tool for greater innovation, business development and regulatory improvement but also for greater access to financial services, whether through traditional banks that welcome these technologies or from new competitors such as Fintech start-ups, or even better, from a collaborative approach from both.