Brazil has become the next country to accept “Open Banking” and has spurred a new regulation that allows only licensed institutions to share valuable customer information.
With these new rules, it allows banks, payment institutions, and other organizations that are licensed by the Banco Central do Brasil, to share (at the customer’s volition) transaction and registration data from legal entities or individuals.
What Is Open Banking?
Open Banking, also referred to as “Open Bank Data” is a banking practice that offers third-party financial service providers “open access” to consumer banking, transactions, and other financial information from banks and even non-bank financial institutions via the use of application programming interfaces or (APIs).
It enables the networking of accounts and information for use by customers, financial institutions, as well as third-party service providers. Open banking is rapidly becoming a major resource of innovation and is set to revamp the banking industry.
The central bank has expressed that the advent of open banking will help “digitize” Brazil’s current financial system and mitigate “information asymmetry” and encouraging the outgrowth of new players to enter the market and promoting more innovative business models.
The bank also says that, with these new regulations, this will make way for an increase of comparison platforms, tools for financial management, and more payment initiation procedures that are more customer-friendly.
When Will This Happen?
The central bank has announced that this implementation will be launched in phases as follows:
- In the first phase, taking place this month of February, the banks will be busy laying the foundation for the market. Those banks that are involved in the OpenBanking ecosystem will be opening data on their service channels and the “characteristics” of both banking products and services through open APIs.
- In the second phase, which happens this July, those institutions that are regulated, authorized, and supervised by the Central Bank will begin sharing customer data, only with their consent.
- In the third and last phase, which will take place in August, customers will be able to pay their bills and initiate money transfers outside their bank’s environment.
Working with Brazil’s TecBan is UK-based open banking experts Ozone, in order to assist companies to fully take advantage of “the new regime”.
The Central Bank approved The Brazilian Open Banking Project back in early 2019. Originally, the plan was to begin the implementation process as early as the second half of 2020. However, due to the outbreak of the COVID-19 pandemic, this had to be rescheduled.
Further efforts for the modernization of Brazil’s financial system included the launch of the instant payments platform, Pix, which went live in November 2020.
Brazil Set For Modernization
The Central Bank of Brazil aims to increase market competition and to strengthen financial education in this Latin American country. The Open Banking initiative is just one of the many ways it seeks to tackle this goal.