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August 12, 2022

Colombia issues decree to implement Open Banking: why is it important and what benefits does it bring?

José Gonzalez Bell
Content Creator at Sensedia
Creador de contenido y periodista. Escribo de tecnología para todos.
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After two years of work with international organizations, industry players and academia, the Government of Colombia issued Decree 1297, which regulates the operation of Open Banking in the country. In this way, Colombia becomes the third country in the region to have a regulation of this type, after Brazil and Mexico.

The decree is issued at a critical moment, in which banking is undergoing important transformations in its value offer, driven by changes in customer habits, the immediacy of smartphones, and internet access. Under this scenario, Open Banking will contribute to promoting competition, accelerating financial inclusion, and improving efficiency in the provision of services.

But what is Open Banking? Asobancaria, a union that represents the financial sector in Colombia, explains that this concept stems from the trend toward data openness, that is, banks will allow access to their customers' data to third parties through an application programming interface (API), which will also enable the integration of services with third parties and the possibility of offering them through non-financial actors.

It should be noted that the exchange of customer information between players in the financial sector and third parties will be carried out as long as the user authorizes it. In this sense, different actors in the banking sector support the regulations that exist in Colombia on data protection, key to successfully implementing Open Banking.

José Gómez, country manager of Sensedia for Colombia and Peru, pointed out that Open Banking will promote the development of more innovative and personalized products, tailored to the needs of consumers. One of the benefits will be, for example, consulting all financial products in a single interface. In this way, the client will better understand their finances.

“Open Banking allows financial entities to better profile users and develop strategies and alliances with entities from other sectors. The decree will boost trade a lot, will generate innovation and there will be a lot of growth at the level of value offer compared to the products and services that customers, both natural and legal persons, will receive, "said Gómez.

This new regulation will give a boost to the innovative financial ecosystem, which has already had a great boost since the pandemic. According to data from Colombia Fintech, core financial startups are a market that has grown considerably. According to the entity, the 322 companies in this category that exist in the country have generated more than 9,000 jobs and made sales of close to $3 billion annually.

There are now several cases where new players offer their clients a range of financial products and services leveraged from established financial institutions. This is the case with integrated payments such as PayPal, Payu, or Cielo Lio. With Open Banking this offer of solutions could increase the numbers of financial inclusion as well. The latest report by Banca de Oportunidades indicates that 90.5% of adults, about 33.5 million people, already have at least one formal financial product. Although these are good results, a good implementation of Open Banking would allow alliances between the different sectors to share information and thus reduce the asymmetries that generate so many difficulties in financing.

To learn more about Open Banking and its development in Latin America, you can download the E-book 'From Open Banking to Open Finance':

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