Brazil will start implementing open banking system in November

The main goal of open banking is to improve competition in the country's highly concentrated banking market

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  • Under regulations disclosed on Monday, banks, when authorized by customers, will share transaction data with other financial institutions;
  • The implementation timetable was kept despite the coronavirus crisis;
  • The Central Bank estimates that rules will be fully implemented in four phases by October 2021.

Brazil‘s Central Bank and National Monetary Council will start implementing “open banking” rules for the country’s lenders on November 30th. Under regulations disclosed on Monday, banks will share customers’ data with other financial institutions through the integration of technology platforms and infrastructures. The sharing of information must be authorized by clients and is estimated that these rules will be fully implemented by October 2021.

The main goal of open banking is to improve competition in Brazil’s highly concentrated banking market. For the Brazilian financial authority, the regulation also fosters the emergence of new solutions and is an important step in the process of digitizing the financial system. 

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The original implementation timetable was kept despite speculation it might have been pushed back due to the coronavirus crisis.

“Open banking is an initiative that has been discussed in several countries around the world, with different scopes and dimensions. In the Brazilian case, we opted for a model that was as comprehensive as possible. This project also facilitates the increase of efficiency of the financial system, encourages innovation, and naturally increases competitiveness”, said the Regulation Director at the Central Bank, Otávio Damaso, in an interview broadcast over the internet.

The first objective is to empower the financial customer with proper data protection, as the information belongs to the client and it is up to him or her to decide whether or not to share that information with third parties.

OTÁVIO DAMASO, Regulation Director at the Central Bank

Examples of new services that can be offered are: comparatives of financial products, financial advisory services, financial management and initiation of payment transactions in a more familiar and convenient environment for customers.

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A practical example of how it will work

Damaso cited an example of a situation where open banking can offer advantages to banks’ clients. “For example, I have an account at bank X and I am overdrawn. I can allow a third party to have access to information from my account and the moment it identifies that I will overdraft, it grants me cheaper credit, covering my overdraft at bank X”, he said.

The implementation of new rules will follow four phases:

  • Phase I: disclosure of data of institutions participating in open banking related to savings or deposit accounts, payments accounts, credit concession, and customer service channels; 
  • Phase II: sharing between institutions of customer registration data, as well as customer transaction data about the products and services listed in Phase I;
  • Phase III: sharing of payment initiation services between participating institutions, as well as sharing of the credit transaction services between financial institutions; 
  • Phase IV: expansion of the scope of data to include, among others, foreign exchange operations, investments, insurance and private pension schemes.
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