Opportunities to establish a Fintech in Ecuador

Introduction

The financial and technological revolution in Ecuador has opened up a range of opportunities for entrepreneurs and companies interested in participating in the financial technology sector, also known as Fintech. In this context, we will explore what it means to be a Fintech in Ecuador, its benefits and the process required for its incorporation.

What is a Fintech?

A Fintech, or financial technology, refers to those companies that use technological innovation to offer financial services in an efficient and disruptive manner. In Ecuador, this sector is growing steadily, supported by the country’s financial and technological modernization.

What kind of Fintechs are recognized in Ecuador?

Until February 2022, the Central Bank of Ecuador (BCE) in the study ¨Panorama de las Fintech en América Latina y el Ecuador¨ Apunte de Economía No. 65 recognizes 12 main services (segments) offered by Fintech companies:

1. Paytech
2. Loans
3. Corporate financial management
4. Personal financial management
5. Collective financing (crowdfunding)
6. Digital currencies
7. Insurance (insuretech)
8. Security, identity and fraud (scoring)
9. Wealth investment management (etrading)
10. Business technologies for financial institutions
11. Digital banks (neobanks)
12. Fintech as a service

This list is not exhaustive and is open to new segments that may arise with the exponential growth of Fintech activities in Ecuador. Ecuadorian regulations recognize and categorize Fintech Activities as Fintech Activities within the Fintech Law issued on December 22, 2022 and its secondary regulations:

1. Auxiliary Services of the Financial System (SASF)
2. Administrators of Auxiliary Payment Systems (ASAP)
3. Specialized Companies for Electronic Deposits and Payments (SEDPES)
4. Financial Technology Services (STF)
5. Securities Market Technology Services (STMV)
6. Insurance Technology Services (STS)

Benefits of Incorporating a Fintech in Ecuador:

1. Favorable regulatory environment:

Ecuador has adopted measures to encourage the development of Fintechs, establishing a regulatory framework that seeks to balance innovation with consumer protection and the integrity of the financial system. Regulation in the country provides clarity and stability, facilitating the entry and operation of Fintechs.

2. Tax incentives:

The country offers tax incentives to companies operating in the technology and financial sectors. This may include tax exemptions or reductions to encourage Fintech investment and growth, providing an enabling environment for the development of new initiatives.

3. Growing market:

Ecuador has a growing market for digital financial services. The adoption of financial technologies is on the rise, and there is a growing demand for innovative solutions that address the specific needs of consumers and businesses in the country.

Until December 27, 2024, BuenTrip Hub in its Tech Startup Radar 21.0 has recognized 312 startups including 69 Fintech within the Ecuadorian ecosystem: Dashboard Ecuadorian Startups – BuenTrip Hub

4. Government support:

The Ecuadorian government has demonstrated an interest in promoting financial innovation and financial inclusion. There are government initiatives to collaborate with Fintechs, providing support through incubation programs, financing and other resources that facilitate the development and expansion of these companies.

What is needed to set up a Fintech in Ecuador:

1. Incorporation: It is imperative that the company be duly incorporated in Ecuador, either as a domestic company or as an authorized branch of a foreign company. Legality and formality are essential steps in the incorporation process, and it is important to take into account that the company must be (i) Corporation and (ii) have a specific corporate purpose.
2. Obtaining Qualification, Licenses or Authorization: In addition to incorporation, Fintech companies must obtain specific authorization from the corresponding regulatory entity. The Superintendency of Banks, the Superintendency of Popular and Solidarity Economy, the Superintendency of Companies, Securities and Insurance, as well as the Central Bank of Ecuador, are the institutions responsible for granting authorizations according to the type of Fintech activity to be developed.

In summary, establishing a Fintech in Ecuador not only implies an opening towards innovation and efficiency in the financial sector, but also provides access to a growing market backed by government support. Following due legal and regulatory process, Fintechs can play a significant role in the economic and technological advancement of the country.

If you identify yourself as part of this sector, we encourage you to explore opportunities for collaboration and innovation, thus contributing to the progress of the financial and technological ecosystem in Ecuador.