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Open banking's debut in Brazil will create products and services that we now can't even imagine, says Guiabolso's CEO

Thiago Alvarez created a technology that pioneered the concept of open banking in Brazil and today offers the solution for fintechs and financial institutions

The first phase of Brazilian open banking was launched today by the Central Bank; it promises a revolution in financial behavior and healthy competition in the banking sector. Eight years ago, a personal finance management app was already exploring this idea, envisioning the potential of a technology that would enable the portability of the customer’s bank and financial data.

Guiabolso, founded in 2012 by Thiago Alvarez and Benjamin Gleason, started as a kind of financial advisor that customized financial analysis. But the idea stumbled upon a concept flaw: the recommendations were based on users’ responses to a five-question survey. It turned out that these users lied or did not know their own financial behavior, which resulted in wrong guidelines. “(We realized that) In order to provide good financial analysis, we needed our user’s bank information. We needed integration with our user’s bank. That was when we had to create the precursor technology to open banking.”

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From then on, the company took off, although not without some resistance. It has raised more than $80 million in five investment rounds and today has more than 6 million users and eight financial institutions integrated, including banks and fintechs. In addition to the platform for financial management and marketplace, Guiabolso also has a solution for companies, in which it provides an open banking solution for financial institutions.

Thiago Alvarez. Photo: Guiabolso/Courtesy.

The open banking implementation by the Brazilian Central Bank has further improved the company’s business prospects. To LABS, Alvarez, who is a model implementation advisor, spoke about the arrival of open banking in Brazil.

Read the main interview highlights:

Beyond banking

“Brazil has gone further compared to other countries, the scope of the Brazilian open banking model is broader, it includes other financial and banking services. It goes beyond banking; it is open finance. The biggest benefit is the competition between institutions. When you have competition, you have better prices and better services because the customer can choose.”

Lock-in effect

“Banking competition is still small in Brazil, but why? Because the customer feels stuck in the bank. It’s the lock-in effect.

A good analogy is a video game: when opening a bank account, the customer is in the first phase. Over time, it advances: it gets a higher limit, a pre-approved credit, a lower interest rate, a customized service package.

When that customer goes to another institution, this institution does not know the customer’s banking history and financial behavior. The customer is back to the first phase. That customer will end up not using all the services of that new bank. In other words, there will be no competition.

With open banking, this problem is eliminated; the customers can share their data and obtain a package of services and products in line with their needs and history. There is a real banking competition.”

What will define the success of open banking in Brazil will be the services and products that financial institutions and fintechs will create.


Open banking potential

“The potential of open banking is just beginning to be explored. The open banking infrastructure will enable the creation of innovative products and services that we never imagined and still do not imagine. Some company will look at a demand and identify an opportunity and will think about creating an amazing application.

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For example, automatic investment. It already exists, but it is the institution in which the client already has an account that invests for him in a fund. With open banking, an investment platform will be able to make automatic investment there in the customer’s bank account. The customer will not need to transfer money from the bank to the platform. The two institutions will work together to benefit the client.”

Usefulness and benefit for the consumer

“Open banking is a technology infrastructure. It is neither the interface nor the product. What will define the success of open banking in Brazil will be the services and products that financial institutions and fintechs will create. That is, how open banking will be applied and what will be the utility and the attraction for the consumer.”