Fintech, Technology

How can a “Company Specialized in Electronic Deposits and Payments” allow you to operate a virtual wallet in Colombia?

19/10/2018

Once it was clear that FinTech initiatives were in need of a particular regulation, Colombia’s government started to pursue multiple legal mechanisms that would allow the industry to grow, while simultaneously being safe and efficient enough for all the parties involved.

Keeping that purpose in mind, Act 1735 was issued by Congress in 2014, creating a legal figure called “Company Specialized in Electronic Deposits and Payments” (hereafter SEDPES), so Virtual Wallet platforms could operate on clear grounds, while avoiding the risk of being accused of massive and habitual capturing of money crimes.

These companies were defined as “supervised financial entities, with light regulatory requirements, that can attract money from the public only to offer the services of payments, drafts, transfers, collection and savings” and, in order to make this system preferable, it was stated that the transactions are exempt from the financial movements tax, if its value was under 65 Colombian Tax Value Units, which currently equals to USD 700.

SEDPES will operate through technological platforms, where users will be able to open up a virtual wallet account using their ID number, with no need to attest former banking experience or to provide further documentation, as these platforms are mainly meant to be used by the unbanked population, which right now, in Colombia, is 20% of the total adult population. The money SEDPES holds from their users, must be deposited in an entity that is supervised by Colombia’s Financial Superintendency, frequently in banks, and their platform must have strict security protocols in order to protect their users, as well as backup funds that guarantees they will be able to satisfy their financial obligations and their users rights in the event of a security breach.

The main difference a SEDPES holds from a regular bank is they are not allowed to grant credit in any form or to provide services of the sort, as they are limited to providing the services that have been enlisted before; however these platforms can provide a “ Rechargeable Virtual Credit Card” that will allow their users to make online payments that can only be made by credit cards. 

Even when this regulation was issued years ago, SEDPES is a fairly unknown figure for the virtual wallet platforms looking forwards to operate in Colombia as, regrettably, a lot of misconceptions stands around FinTech companies in Colombia, particularly regarding their  faculties and limitations. However, the legal figures created by Colombia’s government, such as SEDPES, are currently allowing many virtual wallets initiatives to come into life, being the firsts steps to an industry that has not reached is peak yet.

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Diseño y Desarrollo: Náutica Digital