What Comes After Open Banking?

By Samuel Moleiro, CEO Brazil of act digital

The last few years have been extremely fertile in terms of technology for the financial sector in Brazil. The introduction of PIX and the transformations generated by the pandemic served to increase the number of companies in the market and develop a large number of 100% virtual applications, such as wallets and digital accounts. This all changed the consumer landscape, especially the so-called unbanked. But perhaps the most difficult transformation to explain is the one with the greatest capacity to change the more traditional technology structures of banking entities.

In 2018, the Central Bank of Brazil (BACEN) began the first discussions on Open Banking. The objective was to regulate and standardize the process of transferring and sharing customer data (both companies and individuals) between financial institutions. The United Kingdom had just completed this process, in the opposite direction to the US, a country where this data sharing was already taking place, however, with each entity deciding both the data formats and which of them would be divided.

After listening to proposals from associations and institutions in the sector, the Central Bank defined the main rules for the implementation process in 2020. Still in progress, it has already advanced by sharing public data, customer information (such as transactional and registration data), and in designing credit offers and initiating payments. The fourth and final phase, already in progress, includes data from other services, such as insurance, pension plans, and investments.

The increased scope eventually resulted in a name change to Open Finance. The initial phases became known as Open Banking, and later Open Insurance and Open Investment were added. In addition to new market segments, this process also results in the participation of additional companies and bodies, such as the Superintendence of Private Insurance (SUSEP). In this way, there is a new number of teams that are going to face the challenge of digitizing their business for the first time in order to be able to take advantage of the avalanche of data available through the Open system. In addition, there will be a new dimension to this challenge for those who have been involved since the beginning, in the case of banking entities.

Because it is not so popular and directly adopted by the final public, who must release their data for some other purpose, that is, an indirect use of information, unlike the PIX in which there is a transaction with immediate effect, Open Banking is still a big question mark. After all, what can it result in? The truth is that today there is a greater appeal for the gains generated in efficiency and automation as a result of the standardization of data platforms carried out by the Central Bank. The agility in the process of offering credit to new customers, using data shared in the market, can be an element of attraction for account holders, for example.

But the truth is that its impact can go beyond the sphere of data shared via BACEN. Those who use Open Finance as an impetus to streamline their information operations will increase their competitiveness in an increasingly diverse competitive landscape.

However, some companies, even those with extensive experience in the market, do not think this way, since it means having to “fix something that isn’t broken”. And the choice to keep these legacy applications, which may not converse with newer technologies, or which are unnecessarily complex, has the potential to lead to high maintenance costs in the medium to long term as they are no longer updated.

A more common situation in these companies is the adoption of data lakes to work around more problematic cases. This way you guarantee access to your data regardless of where and how it is stored. However, legacy systems will start to offer higher operating costs over time, while new entrants will already have at their disposal a large amount of shared, organized, and managed data — precisely opposing the old advantage of maintaining structures with a longer history. Therefore, we can conclude that using shortcuts tends not to be sustainable in the long run.

We also analyzed that the window of opportunity for renewing and optimizing the technological park comes at a key moment. This is because in a hot and competitive market, knowing how to use the best of innovations such as Open Finance, APIs, back office, and multi-cloud is essential to create better service experiences. The better they are, the more consumers can be attracted.