Technology

Open banking debuts on Monday in Brazil; first phase focuses on financial institutions and fintechs

The Brazilian Central Bank expects that with the new system there will be more competition and less interest

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  • In this first phase of open banking implementation, financial and payment institutions will provide information (features and prices) on their banking products and services;
  • The sharing of customers’ banking and financial data begins only in the second phase of implementation;
  • Open banking is an idea that information about the financial life of a particular customer belongs to the individual and can be shared with whomever he authorizes.

Brazil’s open banking initiative debuts on Monday 1st with the promise of expanding access to credit and financial products for consumers and companies.

In the first phase there is no sharing of customer data. Now, financial and payment institutions will provide information (features and prices) on their banking products and services related to accounts, credit cards and credit operations for individuals and companies. The data are available on the websites of each bank.

At this moment, the target audience is the institutions, developers and fintechs themselves. According to Otávio Damaso, Regulation Director of the Central Bank, it is expected that with this information, tools for comparing banking products and services will be developed, increasing competition and improving the offer to the customer.

READ ALSO: Open banking can grab up to BRL 110 billion from traditional banks in Brazil

At the launch event, Roberto Campos Neto, president of the Central Bank, stated that open banking is the same thing for the financial system as the internet is for society. “We will see the benefits and use cases in the coming months and years,” he said.

Open banking phases

The sharing of customers’ banking and financial data begins only in the second phase of implementation. In this phase, scheduled to start on July 15th, customers will be able to authorize the sharing of information about their financial transactions with other institutions. Sharing must be authorized directly by the customer and can be terminated at any time.

In the third phase, scheduled for August 30, payments will begin, with the integration of open banking with PIX. And finally, all financial products and services, such as foreign exchange, investments and pension plans will be integrated into open banking.

The forecast is that all four phases of implementation of the model will be completed by the end of 2021.

What is open banking in Brazil?

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.

READ ALSO: Bye big banks, hello fintechs? Open Banking’s first phase in Brazil starts in February

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.