This Monday (1) marks the beginning of the implementation of the open banking in Brazil. This is the first of four phases. If the schedule is followed strictly, the last and fourth stage will start on December 15, when then the system will be able to allow, through data exchange, the user to have access to cheaper or more comprehensive financial services than current.
Open banking systems are being implemented in several parts of the world. In Brazil, banks started working on the subject in 2018, according to the Brazilian Federation of Banks (Febraban). But it’s up to the central bank to regulate and conduct the implementation of open banking in Brazil.
Basically, open banking consists of a system that decentralizes the financial information held by major operators, such as traditional banks, to allow the customer to choose which solution to use in each circumstance and have more control over their own bank details.
For example, if the user does not have the money to pay a credit card bill, open banking will allow debt data to be accessed by a fintech capable of indicating the financial institution offering the lowest interest rate financing for that transaction. .
Another example: if the user already has an open loan, open banking will allow other institutions to make portability proposals with lower interest and rates. It is for situations like this that the Central Bank believes that open banking will stimulate competitiveness among banks, fintechs and other financial institutions in Brazil.
Of course, open banking is not just about financing. Virtually all financial services may benefit in some way, including insurance, investments, foreign exchange and credit cards.
For services such as those in the examples to reach the user, he must authorize one or more institutions to access his existing financial data in another.
Open banking will serve as a “middle ground” for this. Institutions will share data through APIs. But it is necessary to ensure the safety and efficiency of operations, hence the importance of regulation.
First phase of open banking
The start of the first phase of open banking was scheduled for the end of November 2020, but the effects of the pandemic and the attention given to Pix caused the Central Bank to postpone this task until February 1, 2021.
In this step, data on products, services (types of accounts, loan types, among others) and service channels offered by participating institutions must be shared publicly.
Based on this, a tool that compares bank service fees may be offered by a fintech, for example.
The first phase does not involve sharing customer data, however. In it, “open banking provides the necessary conditions for the development by the market of business models and services that make it easier for customers to compare different financial products and services available for contracting”, explains the Central Bank.
Next phases of open banking
The next phases of the implementation of open banking in Brazil will follow the schedule below (again, if there are no changes). The idea is to allow the system to reach the final stage in December 2021:
- phase 2 (7/15): institutions will be able to share the client’s registration and transactional data, with the due authorization of the client;
- phase 3 (08/30): customer financial information history can be shared; payment transaction initiation services and credit transaction proposal forwarding will be authorized, that is, the user will be able to access payment services or obtain financing through open banking;
- phase 4 (12/15): final phase, includes data sharing on foreign exchange operations, investments, insurance and salary accounts, for example.
Febraban recalls that open banking requires active user participation with regard to consent on data sharing and financial operations.
The customer owns his data and must expressly give his consent for them to be shared in the open banking infrastructure. He must request and authorize the sharing of this information, choosing when, how and with which institution this will occur.
Leandro Vilain, director of innovation, products and services at Febraban