About to be implemented in Brazil, open banking will fight for 60 million customers and can cause a revenue loss up to BRL 110 billion for large banks, according to an estimate by Roland Berger.
A research by the consultancy shows that Brazil has the potential to be the open banking’s new world reference, considering the changes that the Brazilian Central Bank (BC) intends to implement and that should promote transformations more effective than those seen in the European Union and the United Kingdom.
Brazilian open banking rights
The regulatory agenda for open banking is a global trend, but the open banking design and its implementation strategy change in each place. According to the senior director of Roland Berger, João Bragança, the differentials of the Brazilian open banking’s design are the centralized management of implementation, a communication standard via APIs (application programming interface) and a broader product scope.
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The European Union‘s open banking had many problems, such as decentralized implementation and customized APIs, which resulted in a major communication problem between the interfaces of each institution. In the UK, 50% of the market had to adopt a standard API.
“Brazil has learned from the mistakes of other countries and is already going further: centralized implementation by the Central Bank, all institutions participating, standardized API and a much larger product scope. This all increases competition, reduces prices, improves the quality of the offer to the consumer ”, he explains.
Customer experience and greater product offering to stay competitive
According to Bragança, large banks can adopt two strategies to remain competitive: to strengthen the relationship with customers, improving the consumer experience; or to expand the availability and efficiency of the product and compete for the best price and the best balance between risk and return.
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While fintechs, big techs and retailers may find it easier to adapt to the first strategy, big banks should prioritize the second and look for ways to remain attractive to high and low-income customers. This is because the high-income clientele is already covered by investment players and the low-income clientele has gained attention with Caixa Tem and the digital wallets.
On the other hand, this scenario gives big banks an advantage in the competition for the middle class, which has fewer specific offers and is precisely the largest group of customers of these institutions.
Big banks have an advantage with the middle class, which is less disputed by emerging markets. So, it is worth investing in good products for this class rather than competing for niche markets that are already well served
João bragança, senior director of roland berger.
He also highlights the urgency of customer experience’s changes in large banks.
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“Traditional banks do not have a digital mindset to compete with markets who were born digital in terms of user experience. The Brazilian financial system is very concentrated, with low competition, which led the big banks to develop a very product-oriented model.”
Open Banking brings customer empowerment
The fundamental aspect of open banking is the customer’s greater autonomy to choose the services and products they want to consume.
The mandatory sharing by banks of their customers’ banking information and the implementation of a standardized technology layer, which will simplify communication and data portability between institutions, will result in cost savings and greater access to consumer credit.
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The premise is simple: if the customer has more autonomy and ease to migrate to other services and products, the competition to insure the customer increases – something healthy for a sector known to be concentrated.
