The Central Bank of Brazil announced the open banking regulations this Monday, May 4th. The implementations should take effect from November 2020 and be fully operational by October 2021, meaning the original timetable has been maintained despite speculation it might be postponed due to the Covid-19 pandemic.
As we mention in this article, the open banking system consists of the sharing of data, information, and services by financial institutions at the customer’s discretion. In other words, consumers will be able to share their personal data, as well as information regarding their transactions, in order to access a larger range of financial products and services that best fit their needs.
According to Otávio Damaso, the Central Bank’s Director of Regulations, the system will increase competition and enhance the financial system’s efficiency.
“Open banking greatly facilitates the increase in efficiency within the financial system and encourages innovation, especially with the development of fintech companies that already operate in the market,” he said.
Therefore, the initiative will allow banks and fintech companies to deliver financial solutions that are customized to the consumer’s needs, in addition to a better payment experience in the digital environment.
The Central Bank of Brazil reinforces that all authorized financial institutions will be able to participate in the open banking system. In addition, the participation of the largest banks in Brazil is mandatory.
The implementation will be divided into four phases, beginning on November 30th, 2020, and ending in October 2021.
• Phase 1: public access to data from institutions participating in open banking on support channels, and products and services related to deposit or savings accounts, payment accounts and credit operations.
• Phase 2: sharing of clients’ and representatives’ registration information between the participating institutions, as well as clients’ transaction data on deposit or savings accounts, payment accounts and credit operations.
• Phase 3: sharing of the payment transaction initiation service among participating institutions, as well as forwarding credit operations proposals between financial institutions.
• Phase 4: data scope expansion, including currency operations, investments, insurance and more.
Expected benefits of open banking in Brazil
The benefits focus entirely on the consumer and the way he decides to manage his financial life.
According to the Central Bank of Brazil, with open banking, customers will be offered a range of financial products and services with better conditions, such as credit with lower interest rates.
“Say I have an account with X bank, and I have an overdraft. I may just as well allow a third institution to access my account information. Once this third party identifies that I am about to enter the overdraft, it offers me cheaper credit,” explains Damaso.
Damaso reinforced that the main goal is to empower customers by allowing them to decide whether or not they will share their information with third parties. This initiative increases competition, providing a more efficient financial service, and encouraging innovation.
Want to learn more? Watch the full announcement on the Central Bank of Brazil’s Youtube channel (in Portuguese).