Open Banking in Brazil has begun, a big step forward for Brazilian Central Bank’s agenda to foster competition in a market that has long been concentrated. Consumers are now able to share their data between financial institutions, but they still wonder what are the benefits for them.
Will Open Banking expand access to financial services and lower rates?
The implementation started in February 2021, but the first milestones for consumers only came on 13 August 2021, with the beginning of its 2nd phase. Now, if they wish, Brazilians can request sharing their financial history between participating institutions - all of them regulated by the central bank. Shared data include account and registration information, detailed account transactions, credit card transactions, and credit history. User experience in the consent process has come a long way, learning from other Open Banking implementations worldwide and improving usability.
It is expected that the shared data will reduce risk costs in a market plagued by information asymmetry. Initially, consumers whose financial history had little visibility, especially young and newly included people, will get access to better financial products. Then, gradually, as banks and fintechs update their risk models, rates will get fairer for each individual and lower due to increased competition. In other words, Brazilians will be empowered to be real owners of their data and will benefit in search of personalised financial services that really meet their needs.
Security, of course, is a big concern. Privacy and protection of data and information on shared services are among the pillars of Open Banking in Brazil to ensure security and a good customer experience. By being well informed and with the certainty that the data is protected, the user is able to make a decision about sharing and use of personal data. Moreover, the Brazilian Central Bank establishes mandatory requirements, which guarantees the responsibility of participating institutions for data security and secrecy.
How Brazillians see Open Banking
For those who imagine that Brazilians will not adopt Open Banking and stick to just one bank, a survey conducted by Quanto (a pioneer Open Banking platform in Brazil) in partnership with Constellation, points out that the trend among smartphone users in Brazil is to maintain several bank accounts - with young people prioritising fintechs on a daily basis. In total, 16 Brazilian institutions were mentioned by respondents in the survey, including the five largest banks in the country.
Among respondents, 75% have an account at more than one bank. Overall, 70% have an account at a fintech company and one in four has changed financial institutions in the last year. Despite the opening of new accounts, half of the respondents say they have never closed a bank account, and most mention the fear of losing their financial history - a critical piece of information for obtaining credit or financing - as a reason, with 62% saying they prefer digital banking, but have an account with a traditional bank to maintain information on financial transactions.
The resistance of most Brazilians to shut down their account for the risk of losing their banking history is comprehensive, and reinforces the importance of Open Banking. To solve this, Brazilians need to have control of their data in a reliable and secure way, regardless of the bank that originated it and whether the person is a client or ex-client of a financial institution.
The bottom line
More than just enabling data sharing, Open Banking paves the way for a different relationship with banks. As a result, it will not be necessary to go to a branch, or even open the bank's app, to finance a purchase or get a loan. It will demand adaptation from the entire market and it still isn’t clear if it will be the banks or the fintechs that will make the most out of Open Banking. The only certainty is that the Brazilian consumer will be the one who benefits the most.
About Gustavo Bresler
Gustavo Bresler, Strategy Manager of Quanto, the pioneer Open Banking platform in Brazil that supports financial institutions in their transition to the new financial system. He is a specialist in supporting the accelerated growth of startups, he worked with the analysis of investments in the venture capital fund Monashees and in the growth process of Moip, fintech of payments. Bresler holds a degree in Business Administration from University of São Paulo (FEA-USP) and has also studied at the Sorbonne and Sciences Po Paris.
About Quanto
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now