Financial Inclusion Backlash in Uruguay

Citizens are circulating a petition because of a national financial inclusion policy requiring all businesses to accept electronic payments and switch to electronic payrolls.

In the run-up to elections this year in Uruguay, an unusual petition has been circulating in cities and villages across the country. It’s a call for a plebiscite against “mandatory financial inclusion.”

Uruguay’s current government, the leftish Frente Amplio, has been energetically pursuing financial inclusion for the past several years, putting in place new banking laws that support the use of electronic payments, among other measures. This systematic approach to installing a regulatory framework for financial inclusion earned Uruguay a top ranking in the Economist Intelligence Unit’s 2018 Global Microscope, which rates the quality of the regulatory and institutional environment for financial inclusion. Uruguay placed third out of 55 countries, a dramatic increase from its previous ranking.

But Uruguay’s government may have been too eager.

Its recent changes to the banking law require all businesses to accept electronic payments and convert payrolls to electronic form. These provisions have been justified publicly largely in the name of crime prevention. Once a very safe country, the incidence of robbery and burglary has been growing, especially in the capital, Montevideo, and many Uruguayans point to the influence of drug money on criminal activity. ATMs have attracted their share of criminal attention: thieves go on weekend sprees to pull ATMs out of walls with pickup trucks, confiscating the cash (or perhaps it’s only an urban legend). This concern prompted banks to place most of their ATMs inside well-protected enclosures.

A first government move to reduce cash was the provision that gas stations could only accept electronic payments after a certain time at night, which was seen as a reasonable security precaution. But this has now been followed by the mandatory provisions mentioned above. And it’s clear that governmental motivations go beyond physical security to increased ability to monitor illicit economic activity and, very importantly, an increased tax base.

Plebiscite Petitions

Much of the population is unprepared to operate electronically, however, especially in the interior of the country. In a surprising move, merchants and small businesses, including those operating in provincial areas where ranching is the economic mainstay, are banding together to resist. These merchants and various politicians have created two petitions which seek to overturn the mandatory previsions of the banking law through a referendum. If one of the petition garners 260,000 signatures, a referendum must be held, as the gentlemen in this eloquent video explains (in Spanish).

In addition to the unpreparedness of the society, opponents of this financial inclusion measure cite high banking fees, unfair contract clauses, and invasion of privacy as concerns. An underlying mistrust of banks is behind many of the specific concerns, heightened by fear of banks and government teaming up against citizens, on the pretext of security. But the biggest complaint is the mandatory aspect of the law. One of the leaders of the protest, quoted in the newspaper El Pais, stated, “We say yes to the financial system, we say yes to the cards, we say yes to the banks….We say no to the obligation.”

Opponents cite high banking fees, unfair contract clauses, and invasion of privacy as concerns.

Sensing a way to undercut the Frente Amplio, which has held the presidency of the country for most of the past decade, nearly all the opposition electoral candidates have signed one of the petitions, which are said to have already secured over 200,000 signatures, although the deadline for getting the measure on the ballot is looming.

Meanwhile, in the same El Pais article, a government spokesperson, defending the new law, called financial inclusion “one of the most important structural transformations of the government.”


While the organized opposition to Uruguay’s financial inclusion law may be unprecedented, many of the concerns and emotions behind it, prompted by a rapid transition to electronic payments, are bubbling beneath the surface in many countries around the globe: a sense that banks do not have customer best interests at heart, that they charge confusing and unfair fees, that the good old ways don’t need changing, and that electronic money creates a major threat to privacy. Governments and financial service providers everywhere would do well to recognize such emotion-laden concerns and work to build customer trust and confidence before moving too fast to transform the way money works.

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