[This article has been written in English and in Portuguese. You can find the Portuguese version here]

According to many insiders, Brazil is the new hot Open Banking frontier globally. After putting in place an ambitious regulatory strategy, Brazilian regulators are pushing to transform the country’s banking landscape, trying to encourage innovation, promote competition, increase the efficiency of the national financial system and the Brazilian payment system, and promote financial citizenship.

To achieve these four objectives, the Brazilian Central Bank (BCB) has been inspired by Open Banking models implemented in other countries, including the United Kingdom, the European Union and Australia. The BCB issued the first resolution to start the implementation of Open Banking in Brazil in May 2020.

A Deliberative Council, composed of six representatives from financial associations and one independent councilor, oversees the definition of the Brazilian Open Banking technical and operational standards. This Council receives proposals from different working groups, formed of members from all associations and the Brazilian Central Bank. This ensures that the Brazilian Central Bank has considered a variety of viewpoints before all proposals are submitted for regulatory approval.

In reality, the scope of Open Banking in Brazil is already oriented to implement Open Finance because it includes the obligation to share investment, insurance and exchange transactions data.

Recently, the Insurance Sector Regulator (called SUSEP) embraced the journey indicated by the Brazilian Central Bank by issuing the normative for Open Insurance implementation, which already considers interoperability with Open Banking.

Below you can find a summary of Open Banking in Brazil, as well as a comparison with Open Banking in the UK.

In Brazil, the Open Banking implementation is divided into four phases. The first of them, was implemented on February 1, 2021, regulating the Open Data sharing from financial institutions, such as the number and addresses of branches, services offered, and fees charged.

Below you can find the Open Banking implementation roadmap.

At the time of writing, we just started the rollout of Phase II.

The third phase was divided into five deliverables. The first deliverable (3A), with the ‘go-live’ date scheduled for 29 October 2021, in which account-holding institutions, that is, in which the customer keeps their money, must carry out financial transactions by instant payments, initiated from other regulated institutions, upon the customer’s request. Once implemented, a customer will be able to ask a regulated institution to move a certain amount of money from their bank account to another.

The second deliverable (3B), will allow the payment initiation through bank transfers (this is a method, still used by some banks in Brazil, which does not have instant payment). In addition, phase III also contemplates the standardization of communication between proposing credit institutions and their digital correspondents (3C), which would facilitate the request and comparison of credit proposals.

With the last 2 deliverables, it will be possible to make payment initiation through “Boletos” (3D), which is a famous Brazilian method of payment, and Debit accounts (3E).

The fourth phase, scheduled to start on 15 December 2021, will start making public the institution’s information regarding insurance, investment, foreign exchange, and private pension (4A) and will evolve so that customers can share their information on these products with other institutions (4B). With it, it will be possible, at first, to verify public information of banks, insurance companies and brokerages alike in phase one. Thereafter, customers may share their information related to these products and services, upon consent, similarly to phase two.

At the time of writing, phases one and two have already gone live and, according to the Open Banking Brasil website, 158 institutions have joined. This includes mandatory and voluntary institutions. The specifications for phase three are being defined and, according to the same source, another 663 institutions will soon join.

Another interesting piece of information is that the institutions participating in data sharing ‘phases’ have already started to also receive data for offering better products and services to customers. In this way, we expect a faster Open Banking adoption than what we have seen in Europe thus far.

Following European trends, a boost in the creation of fintech companies aimed at individuals and small and medium-sized enterprises (SMEs) is expected. If Brazil follows the trajectory seen in other countries that have adopted Open Banking, innovative solutions will soon emerge for consumers in various areas, such as financial management applications, account aggregators and product comparators. For SMEs, instead, the development of financial management, e-commerce payments, accounting, and tax solutions, among others, is expected.

[The author of this article, Luigi Iervolino, is Director and Head of Open Finance at Bip Brazil]

[This article has been written in English and in Portuguese. You can find the Portuguese version here]