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The Colombian central bank has set out new regulations and standards governing the country’s new low-value instant payment system inspired by Brazil’s Pix.
On October 31, the Central Bank of Colombia (Banrep) issued regulations aimed at supporting the building of an instant low-value payment system in the country.
Banrep Circular No. 40 lays out a set of rules and standards for a Pix-like instant payment system that the central bank has been tasked with creating.
The regulations establish that, going forward, any type of low-value instant payment method must be interoperable with other payment methods using the central payment infrastructure, ensuring that Colombians can transfer funds to any account regardless of which financial institution they have an account with.
The rules also require financial institutions to make the payments available for the payee within 20 seconds and ensure “a simple and standardised customer experience for all participating entities”.
Similar to Pix, the popular Brazilian instant payment method, Banrep said the customer experience will be supported by a distinctive graphic design set by the central bank, which must be used by all financial entities that offer this type of instant payments.
Like Pix, the Colombian payment method will also require users to create so-called "keys", such as a phone number or email address, which will serve as an identifier for their deposit products.
Colombia as a regional fintech leader
In recent years, Colombia has successfully positioned itself as one of the main fintech hubs in the region, following Brazil and Mexico.
With a population of slightly over 50m, Colombia was home to more than 320 fintech companies as of July 2022, according to local trade body Colombia Fintech.
According to Colombia Fintech's Latam Fintech Market 2022 report, 76 percent of Colombians use some sort of fintech service, the highest level of adoption across Latin American countries.
The number of Colombians with any type of banking product had also increased from 55 percent in 2008 to 90 percent by 2021, according to the Financial Superintendency of Colombia's Financial Inclusion Report 2022.
Several news sites have estimated that investors contributed more than $1bn to the Colombian fintech space between 2019 and 2022.
The large increase in adoption and investment in fintech products has been solidly underpinned by various regulatory efforts aimed at making the country a fintech hotspot in the region.
For instance, in 2019, Colombia was the first country in the region to launch a regulatory sandbox allowing start-ups to experiment with innovative products under relaxed conditions.
At the same time, Colombian policymakers established a fast-track licensing procedure for fintechs, further encouraging the creation of new fintech companies.
Last July, Colombia also passed a decree to adopt an open banking framework, joining the likes of Mexico and Brazil as the third country in Latin America to regulate the sharing of consumer data.
To further facilitate the country’s ambitious payment modernisation plans, in May, President Gustavo Petro ordered the central bank to design an “interoperable payment system” with the ultimate goal of reducing cash reliance and increasing digital financial inclusion.
Colombia’s version of Pix
In a December document, the central bank said the new instant payment system will process low-value payments around the clock 24/7, in a safe and cost-effective manner, with full interoperability with other systems, and enabling scalability to support a wide range of use cases.
The new system will be designed to take into account lessons learned from other existing systems such as Brazil’s Pix, Banrep said in the document at the time.
Latam fintech influencer Edwin Zácipa has praised the announcement, calling it the moment when “the Colmbian Pix launches”.
According to Zácipa, this is a “great inter-agency effort to reduce the overuse of cash” in the Colombian economy.
Although the regulations mark a significant step in Colombia’s journey to a modern payment system, Banrep emphasised that the regulation will be implemented gradually, which will allow stakeholders to adjust to the new operational structure of instant payments in phases.
