Open banking is gaining momentum in Latin America. Although its implementation is a common goal, each country is advancing at its own pace. At present, Mexico, Brazil, and Colombia are the nations that already have regulations in this area, which will become a complement for financial institutions to develop more innovative and personalized services.
Meanwhile, Chile, Argentina, and Peru are making progress in the studies and structuring of their regulations in order to begin implementation as soon as possible. The critical thing in this exercise is for governments to record the experiences of neighboring countries and adapt the most convenient rules for each market.
During the pandemic, the digitalization of society accelerated and the growing use of emerging technologies drove a change in the financial system. As a result, Open Banking schemes have increased adoption in both developed and emerging countries. Authorities are becoming increasingly interested in the benefits of these schemes in terms of more significant financial deepening and, therefore, the trend towards their regulation is growing.
This trend, which is currently being experienced in Latin America, is due to what happened in the United Kingdom, the first country in the world to implement a regulated and mandatory open architecture scheme. The initiative is currently led by the Open Banking Implementation Entity (OBIE), which has set three main objectives to be taken into account during the deployment of open banking: competition, innovation, and transparency. Pillars taken into account by regulations in Latin American countries.
According to figures from the Allied Market Research report, the size of the open banking market will reach US$43,152 million in 2026. In addition, it is estimated that more than 70 countries are advancing their open banking regulatory frameworks.
Mexico is a key player in the open banking conversation in Latin America as the first country in the region to develop regulations around data sharing as part of the 2018 Financial Technology Institutions Regulatory Law, also known as the Fintech Law. It is the first official document that talks about the act of sharing data and financial information in article 76. However, it should be clarified that it is not a regulation only for Open Banking.
The authorities divided the strategy into three work fronts a) open or public financial data (location of ATMs, branches, financial products, and services offered), b) aggregated data (statistical information held by supervised entities that, due to its nature and processing, cannot be disaggregated), and c) transactional data (data related to the use of financial services by financial consumers).
In July 2020, the National Banking and Securities Commission (CNBV) published a circular regulating the exchange of open financial data. In 2022, the provisions of the second phase, i.e., aggregate and transactional data, were expected to be published; however, they are still pending.
The second country to issue a regulation for Open Banking was Brazil to implement it in four phases, all of which have been underway since 2021. The first phase aims to make the data available to the financial institutions themselves, which must present information on their service channels (physical and virtual branches) and their products and services, including commissions and fees for each product and service offered.
The second phase allows consumers (with prior consent) to share their data (records, account transactions, card information, and credit operations) with institutions of their choice.
The third phase allows consumers to access financial services such as payments and sending credit proposals, without the need to access the channels of the financial institutions with which they already have a relationship.
The fourth phase foresees the inclusion of new data that can be shared, as well as new products and services, such as the contracting of foreign exchange operations, investments, insurance, and private pensions.
After two years of work with international organizations, industry players, and academia, last July the Colombian National Government issued Decree 1297, which regulates the operation of Open Banking in the country.
The norm regulates, mainly, the activity of initiating payments through the Low Value Payment System; the treatment and commercialization of personal data of financial consumers by the entities supervised by the Superintendencia Financiera de Colombia (SFC); and the offering of services through digital ecosystems.
The regulation authorizes the entities supervised by the SFC to treat and commercialize the use, storage, and circulation of personal data of financial consumers. This is subject to the prior, express, and informed authorization of the consumer.
It should be noted that the Financial Superintendence of Colombia must, within 12 months, establish the technological, security, and other standards that the entity considers necessary for the development of the open financial architecture in Colombia.
"Open Banking allows financial entities to better profile users and develop strategies and alliances with entities from other sectors. The decree will make commerce more dynamic, will generate innovation and there will be a lot of growth in terms of the products and services that customers, both individuals, and companies, will receive," said Jose Gomez, country manager of Sensedia for Colombia and Peru.
In summary, Open Banking will encourage the development of more innovative and personalized products, tailored to the needs of consumers. It will also bring many benefits to Latin America in terms of financial inclusion.
Discover how Open Finance seeks to energize other industries, download the free Ebook "From Open Banking to Open Finance" here: https://bit.ly/3BMTd69