Digital contracting: interview with María del Carmen Yuta, partner of Vodanovic Legal

Given the reality that we live, where the digital revolution is increasingly present not only to favor access to sophisticated products or services, but also to facilitate the realization of daily activities, such as shopping in supermarkets or access to accommodation , it is important to ask ourselves what aspects should be necessarily guaranteed in order to continue contributing to the "growth of electronic commerce", without risking the interest of all of us "users" and the confidence in the use of these technologies to improve the user experience at really less expensive costs. 

According to figures from the Foreign Trade Company (Comex-Peru)[1], e-commerce in Peru reached a growth of 47% from 2013 until the close of 2018, while the expense was US $ 1,700 million in 2013 and reached US $ 2,500 million at the end of the same period. Everything indicates that these figures will further boost this activity, with the 2019 being a key year for the peak of the E-commerce in Peru. The foregoing leads us to consider that a reality is becoming closer in which the contracting of all the products and services that one can imagine can be carried out through electronic or digital channels, leaving aside the cumbersome process of face-to-face hiring that, not many years ago, dilated tremendously the attention of diverse needs.

Within the framework of this scenario, it is important to define what legal and not-so-strictly-legal aspects should be analyzed by the competent authorities in Peru, in order to safeguard a "safe and reliable" contract that allows the various agents in the market -not only financial system companies authorized by the Superintendency of Banking and Insurance (SBS) - to contribute effectively to the deepening and expansion of financial services, converting them -without ignoring their particular characteristics- into daily services of immediate access for all "users" in the market, and not just an atomized sector in our country. 

In line with this, we conducted an interview with Vodanovic Legal's expert in financial services contracting and partner, María del Carmen Yuta, who answered a series of questions related to the impact of technology in the contracting of important services such as financial

1) We are facing a reality that increasingly demonstrates the use of technology to improve services of various kinds, including as part of these financial services and, with it, the user experience. In this context, what legal aspects do you think should not be omitted during digital hiring?

One aspect that can not be omitted during digital contracting is the need to guarantee the user, and contracting in general, security in the conduct of their transactions. In the area of ​​financial services, the need for financial services companies supervised by the SBS to adequately manage their operational risk, which includes those risks associated with information technology, has been regulated. However, the special SBS regulations on the subject do not establish specific conditions linked to digital security.

The foregoing, leads us to conclude the need that, in the digital procurement of services of various kinds, including financial, take into account legal aspects associated with cybersecurity, either through guidelines, standards or a special regulation on the matter, as a necessary condition to generate trust among the users without affecting the experience of the latter in a digital context.

2) What do you think have been the main impediments that Peru faces to equate the regulation of other countries in terms of digital contracting?

Peru is a country that enjoys a significant percentage of informality in the conduct of commercial transactions in general. The use of cash is a very common and widespread practice in the Peruvian population, which can mean a major obstacle in the development of digital procurement in general with respect to other countries, including the region, such that they are not evident, For example, until now, regulatory initiatives that have been able to materialize to regulate electronic commerce.

In this context of informality, the State has issued measures aimed at promoting the formalization of the economy through the use of means of payment in transactions of goods and services that exceed a certain threshold. The limitation is noted in the use of legally recognized means of payments, as these necessarily involve the participation of financial services companies supervised by the SBS, leaving out the rest of financial agents capable of offering payment and / or transfer services (eg . payment gateways).

In this way, the high concentration of the supply of payment services in certain financial agents, and the lack of a regulation promoting effective competition in the payment market, constitute an important obstacle in Peru for the development of digital contracting; Unlike other countries, where an open payment infrastructure is promoted as an integrating element of the market and strengthening of industries (this is the case of Regulation at the European Union (EU) level, such as PSD2 and Instant Payment -SEPA) .

In addition to the above, Peru has little regulation applicable to the processes of identification of digital identity and . On the side of financial services, there are certain provisions aimed at requiring the use of authentication factors to verify identity and record the consent of users in a digital contracting context; However, the legal and economic barriers associated with the use of the digital signature surely make it difficult to proliferate, unlike the EU countries, where they are committed to a process of   simple, safe and completely digital through the promotion of a single European environment, this is valid in all EU countries - for electronic signatures and third-party digital trust providers (eIDAS Regulation).

3) We have seen that countries in Europe and Asia lead major changes in the implementation of technology in their commercial relationships for access to financial products or services, could you comment on what you believe are the main benefits of such transformation, starting of your experience in Italy.  

The benefit of improving the user experience is undoubtedly the main one. The digital transformation and the use of technology to access financial products or services has contributed decisively to reinforce the role of customer-centric banking, and to build an increasingly close relationship with it and a personalized digital experience. The examples of experiences that can be verified in Europe in relation to this new role of the bank are varied.

An example are the Neo banks, banks that bet on technology in their operation, offering financial services similar or better than those of traditional banking, because they do it in an automated way (faster, at lower costs) away from the use of traditional channels. In Italy, an interesting case to mention is that of that Bank that offers free digital accounts, betting on a "digital" user experience.

Another example is the obligation, in Europe, for example, to interact within an API ecosystem by financial agents. The use of open and connected APIs improves the productivity and efficiency of financial services, enriching the user experience and allowing the generation of dynamic ecosystems expressed in new financial services.

4) Every time we are witnessing the incursion of a greater number of Fintech companies in the Peruvian market, what do you think are the advantages that these companies have today compared to those that are supervised by the Superintendency of Banking and Insurance (SBS)? . You consider it necessary to implement a specific regulatory framework for the activities carried out by them.

The advantages that FinTech companies enjoy for the moment are that they lack a specific regulation to comply with, since there are no special provisions that are applicable to them due to their particular characteristics. This does not mean that they are not subject to any type of regulation, since there is transversal legislation that covers them (consumer protection regulations, rules for the prevention of the crime of money laundering and financing of terrorism, legislation on the protection of personal data, etc.).

Some of the advantages currently enjoyed by FinTech companies are, for example, the absence of prudential requirements due to the risks associated with their activities. Considering the technological component that is behind the different financial services provided by such companies, the operational risk linked to the use of digital technology, including the risks related to the security of digital information, is an important regulatory breach that companies enjoy. FinTech, because minimum control parameters have not been devised at the moment. Another example is the absence of minimum capital requirements and / or other support mechanisms that can serve as a guarantee in cases of financial losses.

On the other hand, with regard to rules of conduct, the regulation applicable to supervised companies is much stricter in terms of transparency and claims management with respect to the general regulations that reach FinTech companies.

5) Finally, what other aspects - non-legal - believe that they should be improved, implemented or assisted by the Peruvian government to achieve higher rates of digital contracting, mainly in order to meet the needs of predominantly underserved sectors in our country.   

A non-legal aspect that in my opinion is decisive is the role of digital infrastructure and connectivity as determining elements to improve access to digital services in general, including those of a financial nature, especially in those underserved sectors of Peru where the level of financial inclusion is still very low.

This important gap at the level of technology requires a joint action between the public and private sectors. Public because it is up to the State to improve the technological infrastructure and connectivity that allows us to bring technology to the greatest number of Peruvians. Private because it is companies that must transform their culture to get on the digital wave, which does not mean digitizing their operations. It means changing the way you think, direct and work, to give value to your services.

In parallel, the momentum of the Fintech industry is an additional aspect that contributes to improving the country's levels of competitiveness in the use of Information and Communication Technologies (ICT) to provide services.


[1] See: https://www.america-retail.com/peru/peru-cifras-proyectan-el-apogeo-del-e-commerce-este-2019/

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Erika Rios
Erika is a lawyer from the Peruvian University of Applied Sciences (UPC). He has experience in banking regulatory advice and financial transactions, mainly in financing with local and foreign financial entities. He currently works at Vodanovic Legal, an expert legal firm in financial law issues. He specializes in Banking Regulation and Fintech.

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