Will it be risky for municipal savings banks to issue credit cards?

The government recently oversaw a project that proposed municipal boxes issued credit cards without prior approval from the Banking and Insurance Authority (SBS) because it considered the measure risky.

The initiative can still be approved at the urging of Congress, as required Peruvian Federation of Municipal Savings and Credit Banks (Fepcmac).

“If this law is not passed, people will not have a better offer, in addition, they reduce our competitiveness, so we want Congress to approve the insistence initiative, we will not stop being regulated by the Banking Authority, Insurance and AFP,” Jorge said. Solis, President of Fepcmac, during a press conference.

Solis argues that this law will improve financial inclusion, as municipal savings banks offer interest rates below 35% compared to banks’ interest rates that exceed 70%.

From my side, SBSwho asked the executive branch to oversee the project, points out that the mass issuance of credit cards could be detrimental to savings banks due to possible technological risk.

Jorge Mogrovejo, Assistant Superintendent of Banking and Microfinance, clarifies that a process is currently underway to allow the release of the box. cards to avoid these risks.

“The issuance and management of credit cards involve a variety of risks that, if not properly controlled, could put financial companies using these products at risk. financial losses this may affect your solvency as well as the solvency of your depositors. The use of cards involves significant operational risks, including fraud, theft, and misuse of information, so appropriate risk management is required,” he told RPP.

Mogrovejo added that currently only Caja Cusco is authorized to issue credit cards, while 9 of the 11 municipal savings banks are authorized to offer debit cards.

Would it be beneficial if boxes could dispense cards?

Federation of Municipal Funds He points out that it currently covers 7 million people and they assure that their current coverage is more than double that of Banco de la Nación and more than the big banks. But would it be beneficial if they issued credit cards?

Jorge Carrillo Acosta, a finance expert at Pacífico business school, points out that consumers could benefit initially.

“The fact that municipal savings banks can issue Credit cards This creates more competition in the financial market, which may initially lead to lower interest rates and benefit users through lower financial costs,” said Carrillo Acosta.

However, the specialist agrees with SBS’s comments on the initiative, as if the box had problems managing issued credit cards, those who keep their money at the institution could be affected.

“The big risk is that savings banks don’t know how to handle credit cards and generate losses financial losses, and by generating these financial losses, whoever suffers is the saver, because ultimately what they borrow with credit cards is not money out of the box, it belongs to the saver,” he explains.

Carrillo Acosta adds that if the goal is to lower interest rates further in the interest of users, private investment needs to be encouraged to bring more financial institutions into the Peruvian market.