“I think they’ll use it to go after the fintechs." That’s the statement of a finance analyst in Buenos Aires, about how he expects the banks to use this year’s recession to lobby the Argentine government to turn the regulatory screw against the emerging competition.
Shortly thereafter, the federal prosecutor Guillermo Marijuan accused Galperín and the rest of Mercado Libre’s board of tax evasion, as well as the Orwellian “crimes against financial and economic order”.
While this example of Mecardo Libre is clearly atypical – given the size of the company – and the move smacks of a personal political feud, there is suspicion among the fintech community they are about to be the target of added regulatory and tax burdens that will reduce their ability to compete with the incumbents.
The banks may be tempted to push for this, given the existential challenge to their business model that will be exacerbated by the coronavirus Covid-19.
They are losing a long-standing driver of profits as the new government pushes the interest rates on the securities paid to banks into negative territory in real terms. Anything they can do to take away a vibrant area of competition would give them some breathing space as profitability wanes.
Now the banks may become the beneficiary of regulatory interference. To embrace that would be wrong. Ethics don’t change depending on the perspective of the position of the viewer.
If the banks don’t push back against anti-competitive behaviour that targets the fintechs – or even if they keep quiet on this point – then they lose their effectiveness to stand against the next wave of counterproductive policymaking.