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Nicaragua’s Fintech Compliance Challenges: A Growing Concern for Investors and Regulators

In a move to regulate the rapidly growing financial technology sector, Nicaragua’s Central Bank (BCN) issued Resolution CD-BCN-XLIV-1-20 in September 2020, approving the Regulation of Financial Technology Suppliers of Payment Services. This milestone marks the first regulatory body established in Nicaragua to oversee the creation of fintech companies.

Regulatory Comparison

While the Nicaraguan regulation is a significant step forward, it lags behind more robust legal frameworks, such as Mexico’s Law to Regulate Financial Technology Institutions approved in March 2018. The Mexican law comprises 145 articles, compared to Nicaragua’s 31, and addresses criminal, procedural matters, administrative sanctions, virtual assets, crowd funding, and other key areas.

Requirements for Fintechs

The Nicaraguan regulation requires fintechs to obtain an operating license or registration from the BCN for services such as:

  • Digital wallets
  • Mobile points of sale
  • Electronic money
  • Virtual currencies
  • Buying and selling currencies electronically
  • Fund transfers

Banks subject to SIBOIF supervision and microfinance institutions regulated by CONAMI can register with the Central Bank without needing a license.

Fintech Advantages

Fintech is a term that combines “finance” and “technology,” referring to the accelerated pace of change in traditional banking, providing innovation and added value. The advantages of fintech include:

  • Financial inclusion for underserved social groups
  • Immediate attention
  • Fewer requirements than formal banking
  • Innovative financial products

Challenges Ahead

However, the regulation is just the first step. To create a favorable digital ecosystem, Nicaragua needs to prioritize:

  • Financial education
  • Clear rules
  • Solid institutions
  • Legal security for national and foreign investors interested in fintech companies

The country’s ability to address these compliance challenges will be crucial in determining its success in the fintech sector.

Attractive Market

Despite some challenges, Nicaragua’s favorable context makes it an attractive market for fintech development. With over 2.9 million smartphones in use, out of a total of 8.3 million active cell phone lines, the country has seen a significant rise in mobile penetration and internet access.