Labour reforms revive tensions between banks and fintechs

President Javier Milei’s upcoming labour reform plan is reviving longstanding tensions between the country’s banks and its fast-growing financial technology platforms.

Among several sweeping changes, salaried workers could choose whether to have their pay-cheques deposited to a virtual wallet or a bank, according to a person with knowledge of the matter.

Currently, only banks are permitted under Argentina law to receive direct deposits. The law could benefit companies including Mercado Pago – the payments platform of e-commerce giant MercadoLibre – while traditional banks including Santander, BBVA and Banco Galicia may be affected.

The government will publish its labour reform proposal on December 9, the day before a new Congress officially starts. Still, that hasn’t stopped industry associations representing both banks and fintechs from issuing duelling statements critical of each other.

The banks said fintechs would be riskier destinations for pay-cheques and pensions, arguing that they face less scrutiny from Argentine regulators. Diverting a larger share of payroll flows to digital wallets would also drain stable funding from banks, curb their ability to lend to companies and households, and increase financial-stability risks, according to the statement.

In response, the fintech group said banks were trying to defend a “captive business,” not protect savers. Digital accounts are supervised by Argentina’s Central Bank, 100 percent of user funds ultimately sit in accounts segregated from company assets and there’s never been an instance in which a licensed payments provider failed to return a clients’ money, according to a statement.

Milei’s Deregulation & State Transformation Ministry, which is spearheading the reform efforts, didn’t respond to a request for comment.

The dispute reflects broader tensions across Latin America as rapidly expanding fintechs seek to encroach on services long dominated by banks. In Mexico, several digital lenders have been racing to secure full banking licenses so they can offer payroll products. That stands in contrast to Argentina’s plan, which could let digital wallets receive salaries without first entering the formal banking system.

If approved, the measure would likely shrink the deposit pool banks in Argentina have relied on for decades, industry observers say. While the country’s checking accounts often offer little to no interest on deposits, many fintech platforms pay interest rates of around 25 percent, near the country’s inflation rate.

It’s far from the first time the two sides have squared off. In recent years, banks have accused Mercado Pago of “abusive conduct” with regard to QR payments. Months later, Mercado Pago claimed banks were acting as a “cartel.”