Written by the Banking and Finance Regional Team:
Guatemala: Álvaro Castellanos and Diego Alejos
El Salvador: Oscar Samour and Felipe Aragón
Honduras: José Ramón Paz Morales and Christian Betancourt
Nicaragua: Rodrigo Taboada
Costa Rica: Mario Quesada Bianchini and Ana Carolina Álvarez
Confinement and strict measures of social distancing are now part of the reality of millions of people around the world. In the face of the world’s uncertain economic, political, social, and cultural environment, authorities must go one step further to try to mitigate the severe consequences that the COVID-19 pandemic has caused globally.
For several years now, Central America has issued regulations to promote e-commerce for the purchase of goods and services. However, their use has not been as dynamic on the part of consumers as it has been in more developed markets such as the United States and the European Union. Now, however, the traditional way of getting to points of sale has been limited by the declarations of emergency and quarantine imposed in most countries in the Central American region. This has forced suppliers of goods and services to update their technological platforms so that consumers can purchase their goods and services. People of all generations have had to resort to e-commerce to avoid going out to the supermarket, buying fruit and vegetables, medicines, and in general access to products and basic necessities.
This new reality forces to review our technology tolos, including web pages, applications that offer services and transportation; even the use of instant messaging apps to determine whether the apps are in compliance with the regulations of each country. This is particularly important in issues of consumer protection, as well as to establish duties and responsibilities of the parties to each transaction. This new reality will also generate a greater use of electronic payments offered by the regions financial entities and forces those entities to review their payment systems to ensure ease, certainty, accuracy and above all safety so that their clients can use them frequently.
In Guatemala, e-commerce has been gaining momentum over the last few years, especially after the enaction of the Law for the Recognition of Communications and Electronic Signatures (Decree 47-2008 of the Congress of the Republic), which recognized the validation of contracting by electronic or digital means, as well as the electronic signature (simple or certified). Additionally, during 2011 the Monetary Board of Guatemala, on the recommendation of the Superintendence of Banks, issued the Regulation for the Provision of Mobile Financial Services (Resolution JM-120-2011). Through said Regulation, providing financial services was facilitated through digital banking or through applications installed in smartphones. Finally, the entry into the national market of several Fintechs that provide virtual wallet or payment gateway services has made this sector more dynamic.
Although it is true that electronic commerce in Guatemala was in full development as mentioned in the previous paragraph, the COVID-19 pandemic has had a positive impact on it. As a result of the restrictions on locomotion, issued by the government, to prevent and mitigate the spread of COVID-19, e-commerce has become the norm, i.e., the most commercial transactions are now conducted electronically, as traditional businesses have modified their business models to accommodate e-commerce and continue operations during the pandemic.
El Salvador currently has a robust body of regulations that constitute the minimum legal enabler for the implementation of e-commerce tools. This set of regulations is composed of: The Electronic Signature Law, Legislative Decree No. 51 of July 5, 2018, which contains the reforms to the Consumer Protection Law with regard to electronic commerce, the Financial Inclusion Law, and the Electronic Commerce Law. This legal framework must be complemented with rules such as the Law on the Protection of Personal Data (currently under discussion in the legislature) and the technical regulations for the use of electronic signatures, which will develop the minimum requirements for signature certifiers and custodians of electronic documents.
The above has allowed the explosion of e-commerce applications and platforms, within the Salvadoran market, which generally follow the following scheme:
- Methods of identification specific to applications based on simple electronic signature mechanisms, whose implementation and regulation is embodied in the terms and conditions of the page or application.
- Generation of simple electronic documents that make it possible to demonstrate the use of identification methods and the willingness of customers to purchase products and services in accordance with the regulations described in the first point.
- Payment gateways of financial intermediaries (banks or third parties), which make it possible to carry out payments through electronic platforms.
- Alternative payment methods, such as e-money providers, which allow the unbanked segment to be brought closer to the national payment ecosystem and to interact in the first phase with certain providers.
- Generation of electronic documents under their own custody (servers, cloud storing, etc.), since this is the only legal alternative at this time.
The above, together with the interaction of the principles of functional equivalence (signatures and documents generated in transactions that are necessary in physical operations will be understood to be satisfied if they are carried out by means of electronic homologation, unless the law expressly requires a formality that cannot be fulfilled due to regulatory impossibility), inalterability of the pre-existing right (the rules of electronic commerce must be integrated into the right that existed prior to them with regard to the electronic manifestation of wills, but does not regulate again the expression of wills or the improvement of legal relations), and technological neutrality (the law does not marry with current technologies, but leaves the door open to new technologies that allow the regulated to be carried out in a more efficient manner), has allowed the integration of all, or some of the elements of the previous scheme, making possible the incorporation of new actors within the Salvadoran market, both local and foreign, which have given way to the birth of the so-called national “geek economy”. This economy must be kept under constant monitoring, since its growth also intrinsically implies the growth of key indicators in social development that allow its modernization.
The pending regulatory framework for development and approval is crucial for taking Salvadoran e-commerce to the next level. For example, through the electronic signature regulation, certified electronic signature providers and third-party document storage providers may be incorporated, which will allow the remote formalization of more complex operations or those requiring greater evidentiary robustness because of their implications.
In addition, the Law on the Protection of Personal Data will facilitate adaptation to international standards, which, although they have been developed by case law, are not sufficient to clearly guarantee (as a law in the formal sense would) the rights of consumers or users, thus generating trust and interoperability between international information service providers and integration into more global electronic markets.
It is possible to state that the national scheme of electronic commerce, permits the suppliers to migrate their operation to electronic platforms, which does not imply a migration of its present products or processes to a digital format, but a total redesign or a new concept of products and services that arise and end in an electronic and remote way. The above-mentioned reality was already in normal stages of implementation by many actors within the market. However, it was drastically accelerated by the COVID-19 pandemic, generating an encouraging panorama, with new applications, platforms that encourage the adoption of digital media, and the banking of the Salvadoran population, without neglecting the protection of their consumer rights.
The challenges generated by the health emergency resulting from the COVID-19 pandemic, have caused the companies that continue working to focus their efforts on implementing the e-commerce tools available in the Honduran legislation. Payment gateways, electronic wallets, and online commerce platforms have positioned themselves as an alternative to satisfy different operational needs. This has boosted the financial technology sector (“Fintech”), which has shown sustained growth in recent years thanks to the support of the Financial Innovation Board promoted by the Central Bank of Honduras and the National Commission of Banks and Insurance Companies.
Honduras has the Electronic Commerce Law, Decree No. 149-2014, in accordance with the recommendations of the Model Law of the United Nations Commission on International Trade Law. It regulates all types of information in the form of data messages used in the context of commercial activities. For its part, electronic purses have their own formal regulation, in the Regulation for the Authorization and Operation of Non-Banking Institutions that Provide Payment Services Using Electronic Money, Agreement No. 01/2016 of the Central Bank of Honduras.
Electronic procurement has become increasingly important and necessary due to the current restrictions on movement and operation. The Law on Electronic Signatures was approved in 2013 by Decree No. 149-2013, however, it was not until the end of 2018 that the first private Certification Service Provider was authorized. In addition, in order to facilitate the use of technologies and increase clarity in their adoption, the National Congress approved the Law of Assistance to the Productive Sector and Workers in the face of the effects of the Pandemic caused by COVID-19 (Assistance Law), Decree No. 33-2020, which, among other aspects, reforms the Law on Electronic Signatures, and establishes measures for the implementation of electronic commerce mechanisms. However, a regulation to the Law of Assistance is still pending, which will provide greater clarity to the enacted reforms.
On the other hand, both the Civil Code and the Commercial Code contemplate the possibility that the contracting parties may carry on without being physically present in the same place. Likewise, Article 12 of the Law on Electronic Commerce already recognizes and grants validity to contracts that are concluded by electronic means.
Although it would be optimal to have more rigorous regulations on data protection in the future, and to include other service areas of financial technology companies, the current regulations have managed to meet the needs of e-commerce activities during the COVID-19 pandemic and the innovations that continue to develop.
Currently, Nicaragua has an Electronic Signature Law approved by the Legislative Branch in August 2010 and its regulations approved in October 2011, by which the certified electronic signature is regulated, giving it the same legal value as the handwritten signature, with the exception of not using it in family law acts, very personal acts, provisions for cause of death and acts that by the law of the matter or agreements between the parties require the use of a handwritten signature. Although this law was intended to be effective from its publication date, to date, the designated governing entity has not begun to operate in accordance with the powers granted by this law; thus, electronic signatures are not available for the performance of commercial activities in general.
Subsequently, in May 2015, the Superintendency of Banks and Other Financial Institutions (“SIBOIF”) approved the regulation on pre-printed signatures in contracts containing financial operations, so that banks, financial companies, non-bank issuers of credit cards and insurance companies could use the pre-printed signature of the legal representative of the institution in a series of contracts, in order to facilitate the formalization of their operations. This standard has since been applied by financial institutions, this being the only sector that has benefited from the use of the printed signature electronically.
Given this regulatory framework and the lack of implementation of the law on electronic signatures, the COVID-19 pandemic has raised awareness among the various economic sectors of the need for prompt implementation of the law and regulations on electronic signatures, to avoid further consequences on the country’s economy. On the other hand, in view of the voluntary confinement of individuals, companies have increased the online sales service, allowing consumers to access services or products from an outsourced or proprietary mobile application. As part of this reinvention, banks have facilitated the payment of services to their affiliated businesses through their technological payment platforms, thus increasing the options that consumers have for making payments to third parties and other financial operations.
The approval of new regulations and the increase in technological practices would be very timely for the advancement of e-commerce in Nicaragua, allowing the strengthening of the region’s economy.
The use of payment gateways by merchants to make available to their customers secure payment mechanisms, whether through the use of smart phones, credit cards or other means, as well as the possibility of signing and formalizing contracts through electronic documents, digital signatures, and other electronic mechanisms, have become more relevant by virtue of the COVID-19 pandemic, allowing the dynamics of economic and commercial life to continue, allowing social distancing and reducing the risk of virus spread, as well as the security and speed of trade operations in the field of e-commerce.
In view of the mass use of the Internet and new ways of making different transactions online, new business management trends have been generated, from which Costa Rica has definitely not escaped. It was in response to these changes and as a mechanism of adaptation to new technologies, that over the years different norms have been approved that regulate and allow the realization of acts of commerce by electronic means. An example of this is the approval and implementation of Law 8454, the Law on Certificates, Digital Signatures and Electronic Documents.
This law recognizes the equivalence of statements or declarations expressed by electronic means, with respect to those made by physical means, giving the same probative force to both. It introduces the figures of the “digital signature” and the “digital certificate,” as mechanisms for the subscription of electronic documents, which in general terms allow the signatory to be linked to the electronic document.
Likewise, and in order to defend the rights of consumers who purchase goods and services within the framework of electronic commerce, in 2017, a chapter was included in the Regulations to the Law on the Promotion of Competition and Effective Defense of Consumers No. 7472, which is intended only for electronic commerce, that regulates issues such as advertising, online sales, transparency, and information management, among other relevant guidelines for the proper development of electronic commerce in Costa Rica, without detriment to the other rights set forth in the regulations, governing the general rights and obligations of merchants and consumers.
However, in relation to electronic payment systems, there is the National System of Electronic Payments (SINPE) provided through the Central Bank of Costa Rica and regulated by the Regulation of the National System of Electronic Payments (SINPE Regulation). This regulation regulates the organization and operation of the National Payments System (SINPE). In 2018, this regulation included the possibility for legal persons other than the supervised financial institutions, among others, to carry out operations within SINPE as payment service providers.
Finally, there are private payment gateways, promoted and managed by Fintech companies. It is important to note that there is a significant trend towards the development and commercialization of these payment gateways, an activity that is supervised and regulated from the perspective of prevention of money laundering and financing of terrorism.
The countries of the Central American region have had regulatory frameworks in place for a number of years to enable the use of electronic mechanisms for the procurement of services and goods. Although some of these laws require complementary regulations that contribute to a better and more solid development of Electronic Commerce, most of them lay down sufficient foundations for the implementation of such mechanisms in the current markets.
The use of electronic media in the context of the COVID-19 pandemic crisis provides mechanisms for conducting commercial activities by allowing, among other things: the signing and formalization of contracts by electronic means, promoting non-presential commercial links, providing new opportunities for access to parties and markets previously considered remote, among other advantages. These benefits must be accompanied by sound regulatory frameworks for consumer rights, providing secure means for the payment of transactions agreed to between the parties, facilitating the continued flow of economic resources and thus playing a key role in promoting trade and economic development both nationally and internationally.
That is why national regulators are more challenged than ever to adapt quickly to the new reality generated by the COVID-19 pandemic, and to use all the necessary mechanisms that, as far as possible, allow each jurisdiction to maintain its economic and financial stability. The call that some sectors have been making for many years regarding the digitalization of different industries is today a real and urgent need that must be met very efficiently and quickly to avoid further damage to national economies by virtue of the global health emergency.