Centro de Innovación Financiera: Creating the Regulatory Framework for Fintech in Costa Rica - The Leading Role of the Regulator in a Small Economy

This article describes the elements of the FinTech roadmap that the Superintendencies, the National Council for Supervision of the Financial System (CONASSIF), and the Central Bank of Costa Rica (BCCR), have been implementing for the design of a regulatory framework for FinTech in the country. Special attention is given to the recently created “Centro de Innovación Financiera (CIF)” and the description of a possible vision for the future.

The views and opinions expressed here are those of the author and do not necessarily reflect the official position of any of her associated institutions.

The FinTech Context

The incursion of institutions that seek to develop technological improvements in the financial sector (FinTech) has grown at great speed around the world. Globally, FinTech has expanded in scope, now covering the full spectrum of finance and financial services.

As explained in the taxonomy jointly developed by the Cambridge Center for Alternative Finance, the World Bank, and the World Economic Forum (2022), FinTech activities can be allocated into 12 verticals: digital lending, digital capital raising, digital banks and/or savings, digital payments, exchange services, digital custody, insurtech, wealthtech, regtech and/or suptech, alternative credit and/or data analytics, digital identity, and enterprise technology provisioning.

In the case of Costa Rica, there has been an increase in FinTech companies in recent years. According to the latest data that the Misión Lunar project has compiled in their radar, as of June 2022 there are at least 55 FinTech-related enterprises in the country. This number contrasts with the identification of 25 FinTech players in the IADB and Finnovista report in 2019, representing a growth of around 120% during that period.

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The FinTech Roadmap of the Supervisors and Regulators in Costa Rica

With the intention of integrating efforts to develop a common FinTech agenda within the four Superintendencies, the National Council for Supervision of the Financial System, and the Central Bank of Costa Rica, a FinTech Working Group was created in 2019.

This group was tasked with studying concepts around FinTech, communicating with national and international stakeholders, and participating in working groups, workshops and studies related to the topic. As the culmination of these activities, a roadmap was developed in 2020, considering not only the state of the FinTech industry but also the particularities of this country.

The roadmap recommended by the group included:

• FinTech Working Group: continuation of the group’s work, maintaining synergies, deepening coordination, expanding knowledge, improving capacities, and strengthening cooperation between the entities represented in the group.
• FinTech Innovation Hub: creation in the system of regulation and financial supervision a space for communication, orientation, and knowledge of the FinTech industry. This hub is known in Spanish as Centro de Innovación Financiera (CIF).
• Legal and regulatory reforms regarding FinTech: aiming to face the challenges that the FinTech phenomenon can impose on the regulatory system and financial supervision, with a modern approach based on activities and proportionality.

The first two points above are already implemented, and the last one is currently under analysis in order to consider the approach, need, and opportunity to perform regulatory adjustments.

What is the Centro de Innovación Financiera (CIF)?

The CIF is a space for dialogue and consultation between those who wish to develop technological innovation initiatives in financial products or services and the regulatory and supervisory entities of the Costa Rican financial system. It is made up of a group of experts in different disciplines, created with the purpose of clarifying and guiding financial innovators in the process of developing and inserting their initiative within the framework of financial regulation.

The objective of the CIF is to facilitate dialogue, consultation, and the exchange of information between financial regulation and supervision entities and initiatives for technological innovations in financial products or services, to ensure their development in accordance with the regulation of the financial sector. At the same time, the Center identifies ...

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