The second phase of open banking’s rollout in Brazil, where it actually goes beyond the banking system and it’s called open finance, began last Friday. At this stage, consumers begin sharing data with other institutions with which they are interested in starting a relationship. In other words, it is the first step in the revolution of access to financial services and cheaper credit that is expected from open banking as a whole. It is also the perfect opportunity for Banco Original, a Brazilian bank that follows the digital booklet since its foundation in 2016, to gain at least 1 million customers from other institutions in the next two months.
Although the regulatory agenda for open banking is a global trend, the system’s design and rules change from country to country. In Brazil, the centralized management by the Central Bank and the set of a communication standard via APIs are some of the main characteristics that make Brazilian open banking different (and, for many experts, better) from the model adopted in other countries. With a layer of standardized technology and easy data portability, major banks, digital banks, and fintech startups have started a race to see who offers the best portfolio and experience to consumers.
Between August and October, consumers approached via apps by the institutions will be able to share some types of data with them. This will happen on a staggered basis, and every two weeks, a new data type can be shared. First, the registration data (such as name, address, and time of registration at the institution of origin), then transaction data, including saving accounts, and then card and other credit operations.
In talks with LABS last Monday, Fábio Lins, executive superintendent of channels, PIX, and open finance at Banco Original, said that institutions were starting the second phase with some caution, testing flows between APIs so that when customers were invited to share their data the experience was flowing well. “[With the second phase] followed by the third phase, which starts now at the end of the month, we will have the opportunity to talk to at least 1 million customers until October. And depending on where each one comes from, the proposal [to attract them to Original] will be quite aggressive,” Lins said.
Original currently has over 5 million customers, of which 4.8 million are individuals, 215,000 microentrepreneurs, and 8,000 companies. In the third phase, mentioned by Lins, institutions will be able to integrate payment services, more specifically PIX (Brazil‘s new instant payments system]. The consumer will then be able to authorize an institution to make a payment or even accept credit offers.
According to Lins, Original made a ranking of institutions and called it “Original Engine of Financial Intelligence.” It works like this: the larger the customer’s home institution and the longer the customer has been with it, the more aggressive Original’s offer will be. “And here we are talking about competing right from the very start. If this customer is new and comes from Itaú or Bradesco [two of the largest banks in Brazil], the time that it takes to open an account, which is already minimal, will drop by half. For those who are already Original customers, we will be able to review the offers and services we’ve made them. We will be able to offer things like 20% to 40% higher loans and bring those customers [to Original for good],” Lins pointed out. “At each cycle of the second phase, and each phase, we will be able to improve the offers made to ours and also to new customers,” stressed Lins.
While large institutions were required to participate in open banking’s framework, fintechs and even smaller banks like Original could choose to participate or not. “We were born within this [open banking] concept, and today we provide payment and credit services to more than 40 players within our Bank as a Service arm, the Original Hub. We are already used to doing this via bilateral agreements. Now, everything is standardized and automated. In other words, there was no reason for us not to participate from the beginning, and discussing the implementation of the system side by side with the big banks”, said Lins.
Unlike other digital banks, which have been growing based on fee waivers as their main gimmick, Original rejects this path. That’s why it also grows, apparently, at a slower pace than its competitors. But there is more to measuring a neobank success than its number of account holders.
An example of the success that Original can achieve with open finance is in the cross offers it has been making to PicPay customers, the largest digital wallet in Brazil and Latin America that belongs to the same holding company that controls Original, called J&F.
In 2020, Original launched a credit card operation and started offering them to non-account holders, more specifically to PicPay users. Of the 8 million cards issued by the bank until March this year, 5 million were for non-account holders, PicPay users.