Open Banking in Brazil: Interview with Itaú Unibanco

Friday 3 December 2021 10:13 CET | Editor: Oana Ifrim | Interview

Marcos Cavagnoli, Digital Cash Management & Open Finance Director at Itaú Unibanco and Itaú BBA, provides key insights about Open Banking in Brazil and the paths going forward.

Brazil entered the first phase of Open Banking in February 2021. What is the status of Open Banking in Brazil, what are the biggest challenges preventing Open Banking from entering the status quo?

In June 2021, the Central Bank published a new resolution that slightly alters the country’s schedule for implementing Open Banking. The aim is to allow banks and the participants of the ecosystem enough test time preparing for the launch.

In June, Phase 2 (which was originally scheduled for 31 May) was postponed to 15 July, and later it has been pushed to 13 August 2021. At this stage, customers will have a more active role and will be able to authorise the sharing of their data and financial information between institutions. One of the main challenges is to test all the technical and security requirements for the customers and their ecosystem.

The third phase starts on 29 October. At this stage, consumers gain access to services such as payments (credit proposals are postponed to 2022) beyond the channels of their own financial institutions.

This year only transfers via PIX will be available in this Open Banking integration scheme. The initiation of payments via other methods (transfers between bank accounts and debit, for example) will have specific deadlines not yet defined by the monetary authority.

The fourth and final phase, called Open Finance, is scheduled for 15 December 2021. Banks will be able to offer investment, insurance, and other products to clients of other institutions. In 2022, we will have complementary launches to offer Open Finance which will be fully rolled out by the end of 2022.

In terms of challenges, these are related to technical aspects and the alignment between the participants and the regulator regarding the technical requirements. From a customer perspective, the challenges are related to consumer education regarding data sharing, consent, and explaining what Open Banking/Open Finance and their benefits are.

What is your attitude towards fintechs and challenger banks in the region regarding partnerships?

I think that Brazil-based banks will enter a competition-cooperation relationship with fintechs. For banks is good to partner with fintechs as they can come up with a different approach to very specific issues. Fintechs are exposed to a larger number of customers and banks can help them with funding and corporate structure as well.

We have several partnerships going on or under discussion. For example, we partnered with Omie, an ERP system for SMEs. We are extending our reach beyond banking. Through partnerships, we can provide small companies with not only payments and bank activities, but also management capabilities. In terms of data, it makes sense to have everything together, especially within an Open Banking approach.

We see retailers partnering with embedded fintech services. This will also be a key characteristic of the Brazilian markets for Open Banking. Then we will have a lot of big retailers, big utility companies, bigtechs also entering this space and making partnerships with banks and fintechs, which will make for a very complex ecosystem.

There will also be mergers between Open Finance and Banking-as-a-Service (BaaS) because BaaS is an initiative that allows non-banking (or non-fintech) industries to provide financial services. When you link this to Open Finance, you can create a synergy in terms of products and experiences for customers. The participation of non-banking and non-fintech in financial services is picking up in Brazil.

What unique Open Banking use cases do you see or plan ahead of the full implementation of the initiative (the date of completion of the current implementation of the new regulation is 15 December 2021)?

The use cases (for consumers, SMEs, and bigger companies) can be divided into two: operational and financial benefits.
Operational benefits surround account aggregation which leads to good information management, insights, and customer recommendations. Our tests show strong customer needs and acceptance from all kinds of companies. Itaú has an acronym, AGI – Aggregate, Gestão (Management), and Initiation – because you first aggregate the data, provide insights management, and then you can initiate payments or credit proposals.

Open Banking and Open Finance in Brazil will not only include information exchange, but also transaction initiation. For a regular person to be having this in an app, companies will have to embed this functionality into their ERP or management systems. With that, you can also have financial benefits – more credit limits and credit amounts.

There’s no one-size-fits-all offer in Brazil. Some people will keep using the card rails/schemes, some will use PIX, and others would like to use Open Banking. Maybe some will prefer working with fintechs, while others will stay with the banks.

The companies that own the customer journey will be at the center of decisioning and a gravitational point for customers. You have to understand the end-user, to have a 360 view of customer data. Everyone will be able to pull data but why will make the customer choose you and not another company? It depends on how you understand the customer journey and how you will use customer data to create personalised products.

The interview was originally published in The Paypers` Open Banking Report 2021.

About Marcos Alexandre Pina Cavagnoli

Marcos Alexandre Pina Cavagnoli has been an Officer at the Itaú Unibanco Group since 2020, responsible for the Digital Cash Management and Open Finance department. He also worked as Managing Director and CEO of business departments in Brazil and Latin America linked to Digital Banking, Payments, Trade Services and Cash Management at companies such as Adiq, 4Finance, Koin, PayU LatAm, JPMorgan, Citi, DaimlerChrysler, and Alstom.

About Itaú Unibanco

Itaú Unibanco is a Brazilian bank with 95 years of history and is currently the largest privately-owned bank in Latin America. It is present in 18 countries and has more than 90 thousand employees, in addition to a service network composed of approximately 4.5K branches throughout the region. It is a full-service bank, offering financial products and services to individual customers and companies in all segments.

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Keywords: Open Banking, Open Finance, BaaS
Categories: Banking & Fintech | Online & Mobile Banking
Countries: Brazil
This article is part of category

Banking & Fintech