Argentinian fintech groups hoped that workers would be able to deposit their salaries into digital wallets for the first time. But politicians removed the proposal, which many see as support for traditional banks.
During negotiations to gain broader support for the law, Javier Milei's party agreed to remove the article. This was despite surveys showing that a large majority of Argentinians want the freedom to choose where to deposit their salary.
Decreased trust in banks increases the use of wallets
Argentinian law currently states that workers must deposit their salaries into traditional bank accounts. Despite this, digital wallets have become popular in Argentina in recent decades.
One reason is that many have difficulty accessing banks. A survey from the central bank in 2022 showed that only 47% of Argentinians had a bank account. This is mainly due to a lack of trust in the banking system.
Several decades of economic problems, such as "corralito" â the freezing of deposits in 2001, inflation, and restrictions on bank withdrawals, have led people to trust banks less. Therefore, more have started using cash and saving in USD.
Therefore, digital wallets from fintech companies, which are not banks, have given more people the opportunity to use financial services in Argentina.
Platforms such as Mercado Pago, Modo, UalĂĄ, and Lemon are now most commonly used. Many who do not have access to regular bank accounts use these apps to start with the digital economy.
Therefore, fintech leaders welcomed the proposal that would allow Argentinians to deposit their salaries directly into digital wallets. But the article was removed from the labor reform before Congress even had a chance to debate it.
"When article 35 was removed from the labor reform, the possibility for Argentinians to choose where they want to receive their salaries disappeared. In practice, the requirement that salaries must go through traditional banks remained, as the banking sector applied significant pressure.
But people have already shown what they prefer: nearly 75% of transfers in Argentina occur via CVU, which is used by digital wallets. Millions of people receive their salaries through the bank just because the rules require it and then transfer the money to fintech companies to get better services, lower fees, and higher returns," says Maximiliano Raimondi, CFO at Lemon, to BeInCrypto.
Political decisions favor banks
The banking associations increased their lobbying efforts this week. They sent letters to key senators explaining why they oppose salaries being deposited into digital wallets.
The banks claimed that digital wallets are not sufficiently regulated, can pose risks to the entire system, and can worsen financial exclusion.
"They have no regulations, no oversight or control equivalent to that of banks. If approved, it could create legal and economic risks, as well as risks for assets and the entire system, which could directly harm workers and the financial system," argues Banco Provincia, a leading Argentinian bank, in a statement.
The fintech organizations disagreed and argued that the claims were false.
"All Payment Service Providers (PSP) are regulated and supervised by Argentina's central bank (BCRA)," says Lemon's CFO Maximiliano Raimondi in a statement. "Digital wallets have been the gateway to financial services for millions of people who have been able to easily and freely open a virtual account and access better financial solutions."
A recent study from the consulting firm IsonomĂa also showed that 9 out of 10 Argentinians want to be able to choose where to deposit their salary. The trend is even stronger among self-employed individuals and those working informally. The study also showed that 75% of Argentinians already use digital wallets every day.
In the end, the banking sector got its way before the proposal went to a vote in the Senate. According to reports, the government removed the proposal to avoid conflict with the banks and to increase the chances of the entire legislative package being approved.