It is a little known historical footnote, but Chile and England once shared the same head of state: Mary Tudor.
When England’s first queen married Prince Philip II of Spain, his father King Carlos V made them a gift: they were to become the king and queen of Chile – as well as of England.
Mary – remembered in dark, popular legend as “Bloody Mary” – was certainly not known for her inclusiveness, mainly because of her association with religious persecution.
But inclusion – of the financial variety – is the motive for a groundbreaking collaboration now underway between Chile and one of England’s most ancient institutions, the University of Cambridge.
The Cambridge Centre for Alternative Finance (CCAF) – arguably the world’s leading research group on financial technology – has chosen Chile to launch a new fintech collaboration network in partnership with the Economic Commission for Latin America and the Caribbean (ECLAC).
Inaugurated in Santiago, the Financial Innovation Hub for Latin America is the outcome of an intense agenda of activities carried out by figures from CCAF last year.
The collaboration network will enable research and policy support for regulators throughout Latin America, in particular in Pacific Alliance countries which already have guidelines to harmonise fintech policies.
At the hub’s official launch, the Governor of the Central Bank of Chile, Mario Marcel, highlighted the importance of this move for developing fintech-friendly policies both in his country and Latin America as a whole.
“Today we are setting in motion a project that will be developed over the coming years and that will allow us to resolve some of the gaps that we have in terms of data, knowledge and comprehension of technological development, and also to facilitate dialogue among regulators in the region, to have a consistent, coherent approach to the regulatory framework that may be applied to this industry,” Marcel said.
After China and Sub-Saharan Africa, the Latin American fintech hub is the third launched outside the UK by CCAF, which is based at the University of Cambridge Judge Business School – and there is a good reason why the centre has targeted Chile.
ECLAC believes that fintech companies may be key to furthering financial inclusion, and Chile has the perfect blend of ingredients for such an important research and knowledge-sharing exercise: it is a member of the OECD, it arguably has Latin America’s most sophisticated financial markets, it has made rapid strides in developing fintech, and its governments have placed a priority on extending financial inclusion.
Moreover, there is a history of close ties with England that go back to the 16th century – which, admittedly, at times have been far from wholesome – and British capital played a key role in the development of Chile’s economy and financial markets after Independence.
Indeed, momentum for the Cambridge initiative came from within Santiago itself, where the Chilean Fintech Association had expressed interest in the UK approach to crowdfunding and how likeminded bodies can better contribute to the policy process.
There is also mutual cultural fascination in both countries, described by William Edmundson, author of A History of the British Presence in Chile, as a “mysterious sympathy”. There are, for example, an estimated 400,000 descendants of British immigrants in Chile, whose forebears brought with them their love of tea, schools, sports clubs and businesses, and it is not unheard of for Chileans to describe their country as “the England of South America”.
The Cambridge initiative also demonstrates that financial inclusion is not just a buzzword favoured by progressives as a rhetorical device with which to advocate social policies – but is now seen as an increasingly crucial pillar in the development of sustainable economies.
A report produced by the CCAF and the FinTech Working Group of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA) argues that fintech can help extend the benefits of financial inclusion to millions of unbanked people around the world.
This helps to explain precisely why emerging technologies constitute a priority for ECLAC and the CAF development bank through their strategic initiative eLAC2020, the Digital Agenda of Latin America and the Caribbean.
ECLAC argues that financial inclusion is not just a means of tackling poverty head on, but also a way of unlocking the entrepreneurial spirit of Latin America.
Fintech companies, for example, have enormous potential to satisfy the financial needs of small and medium-sized enterprises (SMEs) – empowering the region’s youthful population to take full advantage of the digital revolution, while improving the efficiency of financial systems as a whole.
The World Bank Group, which has launched a Universal Financial Access 2020 initiative, has argued that this not only helps families and businesses plan, but also makes them more likely to use other financial services such as credit and insurance, to launch businesses, invest in education or health, manage risk, and cope with financial shocks.
However, in order for fintech to become a tool of financial inclusion, it requires innovation by regulators – and that represents a significant challenge, especially in emerging and developing economies where resources may be limited, explaining the CCAF initiative.
That is why significant emphasis is now being placed globally on the role of regulators in understanding and supporting fintech through innovation offices, regulatory “sandboxes” – testing grounds for experimental business models – and regtech, which uses IT to enhance regulatory processes.
The scholars of Cambridge have recognised the role that Chile – and through it, Latin America as a whole – can play in that process.