Financial Crime World

Investor Profile: Online Lenders and Payment Processors

A recent report by the regulatory body BCRA has shed light on the growing online lending market in Argentina, which is dominated by fintech companies and traditional financial institutions.

The report highlights the differences in business and regulation between online lenders that are financial institutions and those that are fintech companies. Fintech lenders tend to cater to the credit market, which is not usually covered by traditional lenders, providing an opportunity for investors to tap into a previously underserved market.

Key Takeaways:

  • Regulation: Online lenders are heavily regulated by BCRA to safeguard public funds.
  • Fintech Regulations: Fintech lenders may be subject to PNFC regulations, which establish registration and reporting requirements, as well as information duties addressed to clients.
  • Digital Onboarding Systems: Digital onboarding systems vary in terms of security measures, with fintech companies increasingly utilizing data collection and cross-checking to identify and predict credit risk.

Investment Opportunities:

  • Traditional Online Lenders: Online lenders that are financial institutions may offer a more traditional investment opportunity for those looking for stable returns.
  • Fintech Lenders: Fintech lenders, on the other hand, may provide an opportunity for investors to tap into the growing credit market and potentially benefit from higher returns.
  • Payment Processors: Payment processors, which are heavily regulated by BCRA, may offer an opportunity for investors to participate in the growth of digital payments.

Risks:

  • Regulatory Landscape: Online lending is a highly regulated industry, with strict requirements for lenders and payment processors.
  • Fintech Risks: Fintech lenders may be subject to additional risks due to their reliance on technology and data collection.
  • Regulatory Changes: Regulatory changes could impact the investment landscape, with BCRA’s recent initiatives aimed at promoting interoperability and improving consumer protection.

Investors looking to tap into the growing online lending market in Argentina should carefully consider these factors before making an investment decision.