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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 panorama of consumers, especially the so-called unbanked. But perhaps the most difficult transformation to explain is the one that has the greatest capacity to change the more traditional technology structures of banking entities. 

In 2018, the Central Bank of Brazil (BACEN) started the firsts discussions about Open Banking. The objective was to regulate and standardize the process of transferring and sharing customer data (both legal entities and individuals) between financial institutions. The UK had just completed this process, in the opposite direction to the US, a country where data sharing was already happening but with each entity deciding the data formats and which data will be shared.  

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 in sharing public data, customer information (such as transactional and registration data), in designing credit offers and initiating payments. The fourth and final phase, already underway, 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 then Open Insurance and Open Investment were added. In addition to new market segments, this process also results in the participation of additional companies and additional agencies, such as SUSEP (Superintendence of Private Insurance). This way, there is a new number of teams that are going to face the challenge of digitizing their business for the first time 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 from the beginning, in the case of banking entities. 

Because it is not so popular and not 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 do? The truth is that today there is a greater appeal to 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 competition scenario. 

However, some companies, even those with extensive experience in the market, do not think this way, as this means having to deal with the “winning team.” And the choice to keep these legacy applications, which may not be compatible with more recent technologies, or that 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 help with 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 – in contrast to the old advantage of maintaining structures with a longer history. Therefore, we can conclude that using shortcuts tends to be unsustainable in the long term.  

We also analyze that the window of opportunity for renovation and optimization of the technology park comes at a key moment. That’s because in a heated 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 won over.