E-banking central to Uruguay financial inclusion law

By
Wednesday, April 30, 2014

Electronic banking services will play a central role in Uruguay's new financial inclusion law, approved by the senate last week, local paper Espectador reported.

The law, which was due to be published by April 30, aims to incentivize the use of electronic payment technology as a means of extending access to financial services throughout the country.

Start your 15 day free trial now!

cta-arrow

Already a subscriber? Please, login

Cellphone technology is expected to play a major role, economist and advisor to the economics and finance ministry Martín Vallcorba was quoted as saying, echoing comments made by the regional association of development banks, Alide, in a report last month.

Under the legislation, employees must be given the option to receive salary payments directly into a bank or e-wallet account, with this form of payment becoming compulsory after three years.

Additionally, from August 1 there will be a 2-point reduction in the value added tax rate for all transactions carried out with debit cards or other electronic payment methods, with options for the government to increase the tax benefits at a later stage, or extend them to credit cards.

One of the most controversial features of the new law is the introduction of payroll credit, which will enable workers to obtain loans which can be repaid in installments through salary or bank account deductions.

"With this mechanism we hope to facilitate and improve access to financing for certain sectors of the population," said Vallcorba.

The law also prohibits the use of cash in transactions worth more than 114,000 pesos (US$5,000).

The legislation will reduce the amount of cash in circulation in the Uruguayan economy, as Uruguayans make more and more use of bank accounts and debit cards or other electronic payment methods, such as e-wallets, said the economist.

A key feature of the law is that citizens will not have to assume any of the costs associated with accessing such services, added Vallcorba.