Fintech Law: CMF approves regulations for open financial system

This regulation represents a milestone for the Chilean financial market and a major step in the implementation of the Fintech Law, approved in early 2023, whose main objective is to promote competition, innovation and integration in the financial system.

Vicente Guíñez
Legal Counsel

On July 3, 2024, the Financial Market Commission (CMF, short for the Spanish CMF) published General Applicability Rule No. 514 (NCG 514), which regulates the Open Finance System (OFS) created by Law 21.52, known as the Fintech Law. The regulations, which will enter into force 24 months from that date, regulate the general functioning of the OFS, allowing individuals and companies to share their information in the financial system and thus access better conditions or new products and services tailored to their needs.

Open Financial System

OFS allows users of the financial system to share their data securely in order to obtain greater benefits and better terms for financial services contracts. Its implementation aims to generate greater competition, financial inclusion and innovation. For example, it will allow a consumer to instruct Information Provider Institutions (IPIs) to send data to Information Based Service Providers (IBSPs). This can happen when a bank user, interested in obtaining a loan from another bank at a favorable interest rate, accesses the history of his transactions to prove his creditworthiness and financial stability.

In addition, once it comes into effect, an interested party that has an account with a financial institution that provides a prepaid card will be able to ask the service provider to instruct the institution to transfer funds to a bank account. The first is referred to as an Account Provider Institution (API); the second, a Payment Initiation Service Provider (PISP).

IPIs, IBSPs, APIs and PISPs (Actors) are to be regulated by the CMF and must comply with obligations aimed at protecting financial stability, preventing money laundering and the financing of drug trafficking and terrorism and protecting financial customers. In addition, Actors must be registered and/or authorized by the CMF.

Entities operating in the OFS will operate through remote and automated access interfaces or alternative mechanisms to ensure system continuity.

NCG 514 Content

Structurally, NCG 514 is divided into six sections that cover the scope of the OFS; system operation; system security and protection; system information; other provisions relating to suspensions, sanctions, implementation, information requirements, and effective date; and regulatory annexes. These regulatory annexes will specifically govern variables for information sets; products; technical issues; and cost distribution specifications.

NCG regulates the following issues:

1. Requirements for registration and entry in the IBSP and PISP registers.
2. Registration of IPI, API and other entities participating in OFS on special lists.
3. Minimum standards relating to the methods of providing and exchanging information, information security, authentication and verification of clients and participating entities.
4. Customer consent requirements.
5. Thresholds for determining the reimbursement of incremental costs for using interfaces.
6. Data to be shared and exchanged.
7. Gradual implementation.

The OFS Regulation complements the regulation already issued on 12 January by the CMF, which regulates the registration, authorisation and obligations that Fintech financial services providers must meet.

Details regarding the implementation process of the Fintech Law can be found on the CMF website.