Digital Financial Services in Colombia: Characteristics and analysis of potential risks

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The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.

AUTHOR OR EDITOR
Bran-Guevara, Jose Gabriel
Hernández-Ávila, Luisa Fernanda
McAllister-Harker, Daniela

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Publication Date:
Friday, 18 February 2022

Abstract

This document analyses recent developments in digital credit and payments platforms in Colombia. It explores digital financial services characteristics, and the potential risks faced by users, providers, and the central bank. We compiled information obtained by simulated products requests on some digital financial services providers' websites.
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We Identified the presence of costs associated with the use of financial digital services, which can constrain users' acceptance and further expansion of these types of services. Furthermore, we recognized intrinsic risks associated with digital services such as electronic fraud and the   emergence of unregulated institutions in the financial system, which could impact financial stability and the effectiveness of the monetary policy.
 
Finally, the document presents how digital financial services are promoted in Colombia and some recommendations to financial authorities to foster its usage and mitigate risks. Some of those measures are related to the promotion of economic, financial, and technological education programs and the update of the low-value payment systems regulation.