Open banking evolves into open finance; understand the change announced by BC – Finance – DMB TECNOLOGIA

Open banking evolves into open finance; understand the change announced by BC – Finance – DMB TECNOLOGIA" title="Open banking evolves into open finance; understand the change announced by BC – Finance – DMB TECNOLOGIA" />

On Thursday night (24), the central bank announced through the National Monetary Council, the resolution that creates the open finance in Brazil. The regulation allows financial institutions to share information about services and customers, upon their authorization. But you might be wondering: Isn't that done with open banking?

Technology and it is. Open banking has been implemented in Brazil in phases. The first started in February 2021. If there are no changes to the schedule, the system will be fully functional in the country by the end of this year.

But, during the implementation stages, the Central Bank understood that changing the nomenclature of the open banking system to open finance would be a good idea.

From open banking to open finance

To understand why, pay attention to this definition of the concept:

Open banking essentially consists of a system that decentralizes financial information held by large operators, such as traditional banks, to allow customers to choose which solution to use in each circumstance and have more control over their own financial data.

In other words, the proposal of open banking is to allow customers to share their data not only between banks, but also between financial institutions of different types: insurance companies, credit unions, fintechs, exchange brokers, and so on.

If that's the case, it makes no sense to maintain a nomenclature that alludes only to banking services. By encompassing various types of financial products — and not just those offered by traditional banks —, the concept of open finance is more suited to the Central Bank's objective of making the Brazilian financial system more open.

This is the essential reason why the resolution that makes open banking evolve into open finance was passed, as the organ itself explains:

This action reinforces the evolution of the Brazilian model of the Open Financial System, which will move from a traditional open banking initiative purely focused on data and services related to traditional banking products to configure itself as a broader strategy, encompassing data on other financial services such as accreditation, foreign exchange, investments, insurance and pension plans.

The next step of open finance

The Central Bank had already “embraced” the idea of open finance. THE resolution published this week serves to formalize the change.

For the next stage, the body must approve, by June 30, the definitive open finance governance structure. It will be up to it to enable the monitoring of the sharing of information and services within the system.

This structure will also serve to make it clear to institutions what their attributions and duties are within open finance, so that, in the event of non-compliance with any rule, punishments can be applied.

It is worth remembering that the rules on consent do not change: a customer's data can only be shared with his authorization. The customer can also stop sharing at any time and define which institutions will have access to their data.