The legal regulation that allows employees in Argentina to deposit their salaries into digital wallets has been on the agenda of the business world and the public for a long time. While fintech companies found this change positive, the relevant article was removed from the bill as a result of the discussions held in Congress. This development brought the increasing interest in digital finance solutions in the country and the balance of power between traditional banking and fintechs to the agenda again.
Factors That Reduce Trust in Banks
According to Argentine law, employees’ salaries must be deposited into traditional bank accounts. Despite this, digital wallet use in the country has increased rapidly in recent years. According to a survey published by the Central Bank in 2022, one in every two Argentines does not have a bank account. This rate is largely influenced by years of distrust in the traditional banking system.
Financial crises such as the “corralito” period of 2001, persistent inflation and occasional restrictions on withdrawals have weakened public confidence in banks. As a result of these processes, many people began to prefer cash or dollar savings methods.
Millions of people outside of traditional banks widely use digital wallet applications offered by payment services such as Mercado Pago, Modo, Ualá and Lemon. Especially for users who do not have a bank account, these tools serve as an entry point to the digital finance ecosystem.
Political and Economic Discussions Intensified
According to the draft law on the agenda, it was planned to introduce the option for employees to receive their salaries into the digital wallets of their choice. However, President Javier Milei’s party agreed to remove this article from the text in order to garner support for the bill.
Representatives of the Argentine banking sector argued that the right to deposit salaries into digital wallets poses risks. Banco Provincia stated the following in its statement on the subject:
“We argue that the regulatory and supervisory framework that banks have is not currently available for digital wallet providers. We think that such a practice may create legal and financial risks and negatively affect employees and the functioning of the financial system.”
Digital wallet companies and fintech representatives emphasized that digital wallets are regulated by the Central Bank and that millions of people have access to financial services for the first time thanks to these applications. Lemon’s finance director, Maximiliano Raimondi, commented in his statement:
“Digital wallets have included millions of people in the financial system easily and free of charge. All providers of the sector are subject to the regulation of the Central Bank.”
According to a recent survey, ninety percent of Argentines want to be free to choose the account into which their salaries will be deposited. Additionally, 75 percent of money transfers in the country are currently arranged through digital wallets. Despite this, due to legal obligation, salaries are first deposited in banks and then transferred to digital wallets by users.
Following discussions, the government eventually removed the right to receive salaries through digital wallets from the bill in order to reduce the reaction of the banking sector to the regulation. Thus, the current practice continued due to the influence of the banks.
