Open Everything
min of reading
March 25, 2021

Compliance with open banking phases

Letícia Trevisan
Digital Marketing & Content Analyst
Advertising executive graduated at PUC Campinas. I work in content development for websites, blogs and social networks, production of endomarketing communications and production of lectures, workshops and events.
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Open Banking is here and is already a reality that started to go into production since February 1st, 2021. And what is it about?

Open Banking is a regulation of the Brazilian Central Bank that gives customers total control over their data, allowing them to release or not this information. So, in practice, financial institutions and fintechs will be able to share customer data and services.

This exchange generates benefits such as innovation and the emergence of new business models, offering customers an easy, agile, secure, and convenient experience, which comes as a bonus. In addition to customizing each product or service, this favours the financial inclusion and education of the population.

In general, in this post you will understand how data sharing will be key to creating new products and services, focused, and personalized for each customer, which serve as a foundation for each phase of Open Banking, as well as how APIs come into this context.  

The expectation is that this transparency between institutions in the exchange of information will provide better credit policies and service offerings that are better suited to different user profiles. And that it will be easier to compare offers from participating institutions, generating greater competitiveness with benefits for consumers.

Who is responsible for building the rules of this game

The Central Bank gathered some of its professionals and representatives of financial institutions to assemble work groups (WG). These are groups focused on security, governance, and data.

These groups discuss and define the APIs that will be used in the implementation of Open Banking, the requirements that need to be met and how it will work in practice. The WG also determined that the entire implementation process will be carried out in 4 phases.

Open Banking Phases

1st phase - Open Data

The first phase of Open Banking has already started, it is called Open Data. Since the first day of February 2021, institutions have started to make their information available.

The shared data is related to service channels, products, and services as well as some APIs related to metrics, status, and data of these channels. Thus, metrics and performance information of these APIs is sent to the Central Bank.

The Central Bank will start to analyse this information and see if all participating institutions are meeting the non-functional requirements for security performance, necessary for each of the phases.

It is important to note that at this stage, no customer data will be shared.

In this first moment, solutions can emerge that compare different offers of financial products and services, helping people to choose the option that best suits their profile and needs.

It is expected that among the potential solutions that may arise are comparators of bank fees, account types and credit cards.

2nd phase - Customer Data

The second Open Banking phase is planned for the second half of July 2021. It is called Customer Data, and this will be the time to share customer data.

And what comes to mind?

LGPD, the need to protect these sensitive customer data. Security requirements - the security WG defines technical security requirements that need to be met by the API platforms involved. And we are also talking about consent.

The APIs that this phase will allow already exist, in addition to all the security requirements in production.

From that moment on, customers, if they wish, may request sharing of their registration data, and information on transactions from their bank account, credit card, and contracted credit products among participating institutions.

As primary benefit, it will be possible for customers to receive offers of products and services better suited to their profile, at more accessible costs and in a more agile and secure way.

There may also be more customized management and personal financial education solutions, for example. The financial ecosystem as a whole also benefits from more innovation, greater competitiveness and by streamlining processes.

3rd phase - Service

The third phase of Open Banking, which should start in August 2021, is focused on service. It presents the possibility of sharing services for initiating payment transactions and forwarding credit operation proposals.

This paves the way for the emergence of new solutions and environments for making payments and receiving proposals for credit operations, enabling access to financial services in a more agile way, through more convenient channels for customers.

The WG defined that every institution that has branches and offers accounts is required to enter phase 3 and share its information.

It is always worth mentioning that all phases are regulated by LGPD, which guarantees the preservation and security of the entire process. In addition to reaffirming the commitment to data sharing, this can only happen with prior and specific authorization of the customer.

4th phase - Other Services

The fourth and final phase of Open Banking, scheduled for December 2021, which is called Other Services, is focused on additional services, currency exchange, investments, insurance, leading us to an actual Open Finance environment, where other financial services become part of the scope of Open Banking.

This means that customers - whenever they want and authorize - may share their information on currency exchange, investment, insurance, private pension, and salary accounts, as well as access information about the characteristics of products and services of this nature available in the market.

Thus, the possibility of the emergence of new solutions for offering and contracting financial products and services, which are more integrated, personalized, and accessible, is further expanded, always with a consumer-centric focus.

With these 4 phases it does not mean that Open Banking will end here, this will open doors, observing areas where the regulation has been in force for a long time, concepts such as Banking as a Service, are reinforced and bring even more benefits.

The Open Banking WG created a website that has all the usage applications, information on the phases, requirements and use cases, for queries and knowledge about OB.

Moreover, they made available the Official Developer Portal, where the APIs of phases 1, 2, 3 and 4 will be made available, to see the contract for these APIs, and the functional and non-functional requirements.  

Banking as a Service

Banking as a Service (BaaS) is a key component of Open Banking (OB), allowing those who adopt this concept to benefit from more partners, new product and service proposals, additional revenue streams and greater customer satisfaction.

An example of an institution that is leveraging the benefits that Open Banking has offered is Banco Original. The institution sees the BaaS platform as fundamental to building an ecosystem of partners to connect different areas of knowledge.

This allows offering more financial/non-financial products, in addition to generating high volumes of transactions and customer retention, as well as providing a source of additional revenue.

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