Pedro Novoa, founding partner of MS Legal, a boutique firm specializing in data protection, gives us some interesting insights into the role fintechs and banks are playing during the unfolding Covid-19 crisis in Colombia.
Leaders League. How are fintechs helping during coronavirus in your country? Is Colombian regulation up to the task in a period like this?
Pedro Novoa. Fintechs have been taking a special approach towards their clients in this situation by making efforts to help them pay their bills by granting special discounts in terms of interest and costs associated with the services. In addition, the terms of paid credit have been extended to two or three installments including a freezing of payments during the emergency period.
In this way, clients are encouraged to use fintechs as a way of obtaining credit in this difficult time, as another way to sustain their daily necessities.
Off course from the fintech perspective, there remain some gaps in Colombian regulation, not only when it comes to facing up to a crisis like the one we are currently going through, but more generally speaking, in terms of the new digital economy and topics like the limitation of the usury rate, and the lack of norms regulating costs associated to new products and the way they can be charged to the clients.
How does fintech help people in Colombia that don’t have a bank account?
Nowadays, Colombian fintechs rely on the bonds clients have with the finance sector to disburse credit so, for the moment, there is a very strong link between the financial sector and the fintech companies.
Looking at financial inclusion, fintechs like Zinobe, the biggest credit fintech in Colombia, have struck substantial agreements with financial entities in which any person applying for a loan can obtain a bank account.
What do you think about the measures banks are taking concerning credit? Is there anything we can do at bank level or with bank regulation to help the country get through this difficult period?
In relation to the economic and health emergency due to the covid-19 pandemic, banks have adopted measures for their clients, such as: grace periods in the payment of their obligations, refinancing of loans, extension of maturity to up to 48 months and lines of credit to meet the needs of individuals and companies with specific purposes.
In this regard, we consider that such measures are appropriate in order to avoid a general default in the financial sector, due to the inability of clients to meet their obligations in what under normal circumstances would be the usual timeframe. Additionally, stakeholders such as the government, financial and non-financial entities, must ensure the availability of resources to the public, particularly to companies that need working capital to continue developing their operations, in order to keep the country's economy ticking over.
Regarding regulation, we consider that the current regulations contained in the Organic Statute of the Financial System and Decree 2555 of 2010 are sufficient for the Financial Superintendency of Colombia to issue instructions to its regulated entities, in order to cope with the emergency economic, as it has been doing through the issuance of various circulars in recent weeks.
What do you think about Bancolombia announcement of a three-month credit-payments freeze?
The measures adopted by Bancolombia are consistent with what we mentioned in the previous answer, however, if the economic and health emergency goes on for an extended period of time, banks will need to review and adjust the measures again. Additionally, financial entities must open sufficient customer service channels to ensure that customers can actually file requests for benefits with the entity.
In a couple of sentences, what has this crisis taught you?
From the business perspective and as a firm in full growth, the present crisis confirmed for me the importance of having a sustained customer base, as this allows us to sustain the company's cash flow in times of emergency when sales of services are difficult in many instances. Hence the importance of seeking to maintain deep and long-term relationships with clients.
On the other hand, financial control of the company is very important and the savings that are periodically made, since this allows the entity to overcome undesirable circumstances like the current ones.