Argentina

At the beginning of 2023, 87% of Argentineans used the Internet.

There is no current legislative or regulatory framework for open finance in Argentina. 

The BCRA (the Central Bank of Argentina) is contemplating the merits of market intervention to require open finance to be delivered by the financial ecosystem. It is also considering what degree of primary legislation would be required to support it. Some minor adjustments in regulatory guidelines have been made to make it easier for market led activity in the domain of payment standardisation and the BCRA and the UIF (Financial Information Unit) have incorporated some provisions into their regulations to support Open Banking. This includes allowing banks to share client information at their request for digital onboarding processes and drafting legislation for consumers to transfer their data.There is however no compulsion for data holders to act as data donors and enable access for data recipients.

There are a wide variety of payment techniques in use in Argentina. On the journey to open banking payments a core component is a fast (interoperable) inter-bank payments system. A form of faster payment system has been in operation in Argentina since 2011. In 2019/2020, Banco Central de la República Argentina (BCRB) started working on a move to an instant payments system (called Transferio 3.0) which was constructed in collaboration with the private sector (using their established rails). In 2022 the system was released. 

As of 2023, the service quality is viewed as hampered by having 3 payment rails with different specifications. The BCRB is developing a project to make them interoperable, rather than replacing them with a single system. 

• The payment system is run by three commercial players
  • Coelsa – the more modern Java based system
  • CBU – ACH 83/85
  • CVU – ACH 83/85

Other than the central banks work on increasing interoperability between Argentinian payment systems described above, any technical componentry of an open banking nature has been developed by the private sector within the commercial space.

The most significant work in this domain has been carried out by MODO, a private company which includes several banks as shareholders.

MODO provides third parties with some API access to banks, creating a commercial and technology proxy to Open Banking. It also provides ‘white label’ services to the banks such as API enabled PFM style applications, payment wallets ( to compete with the fintechs such as Uala and Mercado Pago), QR code based loyalty for merchants and some other services.

It is not an open system, in the sense that a third party with a regulatory permission has a right of access. Nevertheless the MODO leadership recognise the importance of seeking to be inclusive and building standards that can support the market, prior to regulation.

In addition to MODO, there are some independent fintechs operating data access via either commercial APIs or screen scraping technology.

The level of bank account penetration increased during the pandemic. This was driven by the delivery of state benefits available through bank accounts and enabled by a national identity scheme to overcome the KYC and AML hurdle.

Due to high levels of inflation, there is a reluctance to store value in local currency in bank accounts.. As a result, 50% of the bank accounts are unused. Many of the other accounts are used as a place to receive the money but then swiftly withdrawn then moved into other assets such as US dollars, cryptocurrency or physical goods.

As a result of the systemic market challenges, there have been high levels of innovation in fintech and in particular the use of e-wallets, cryptocurrency and non-bank lending. Cheques and cash are also still common.

Customers will clearly accrue more advantages from open banking capabilities if the underlying utility of banking is better met. The challenges of technology standardisation, liability framework and regulatory compulsion can be delivered but need economic reform to run in parallel.

Unbanked people also have other ways to access financial products, as 23% of Fintech borrowers were registered as unbanked and 47% as underbanked in Argentina.

Whilst the innovation is providing solutions to some of the market issues, there are some profound adjustments that need to be made. 40% of people operate in the informal economy. Whilst the national ID and deep penetration of mobile ought to be significant drivers of digitisation, there is awareness that regulatory development coupled to public policy will be required to deepen inclusion in the digital economy and increase the tax yield. 

A central foundation of digitisation is the ease with which a customer, be they a consumer or a business, can transfer their data from where it is to where it needs to be. Accelerating the open finance journey in Argentina would be a major milestone in tackling the systemic issues mentioned above.

In many markets across the globe a ‘live market’ has pre-dated a move to a regulatory led and a technically standardised version of open banking/ open finance. The main drivers of the transition have been providing a liability framework between providers and customers and in ensuring a level and competitive market where accredited firms have the right to participate in a fair (open) ecosystem.

The high levels of innovation in Argentinian fintech (who are finding solutions to end customer problems) is creating demand for open banking. This is being partly met by the services of MODO and other fintech providers. However, they cannot be in a position to undertake accreditation of other fintech firms, underpin customer data rights or finalise a liability framework without policy intervention.

Argentina continues to produce high levels of innovation to meet market and customer challenges. The universities perform strongly for the level of investment they receive. The economic challenges have led to entrepreneurial and digital talent draining to other countries. Improving policy and regulation in financial services would certainly make it easier for inward flows of venture, private equity and corporate capital, providing an anchor point to retain the top talent.    

Argentina ranked 75th out of 134 countries in Wiley’s Digital Skills Global Index 2021.