Third phase of Open Banking goes live in Brazil

Instant payments is among the new capabilities introduced under the latest stage of the initiative.

The third phase of the Open Banking initiative in Brazil goes live today (October 29), introducing services such as Pix, the country's instant payment system.

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Open banking - a practice that allows third party financial services firms to open up customer data for regulated providers to access, use and share through application programming interfaces (APIs) with consumer consent -- is being introduced in Brazil under a phased approach.

The current phase aims to enable the introduction of new environments for making payments and, subsequently, new dynamics for credit operations. After instant payments, other capabilities to be introduced under the third phase will include services such as transfers between accounts of the same institution, direct debits and credit proposals.

The third phase of the initiative was originally due to start in August. However, this stage was postponed due to the need for adjustments in the technical specifications. Brazil's Central Bank argued at the time, saying these tweaks compromised the deadline for carrying out tests for the certification of the participating institutions.

The fourth and final phase of the project is scheduled to start in December 2021, when financial services such as insurance, pensions and investments will be added. Just as phase 3, the fourth stage of the project will be gradually introduced, and Open Banking in Brazil will be fully rolled in Brazil by September 2022 rather than the end of 2021, as initially planned.

With the final stage, which will see the start of information sharing beyond traditional banking products and services, the Brazilian Open Banking project will shift to Open Finance. This is when an individual's entire financial footprint with data such as mortgages, savings, pensions, insurance and consumer credit would be opened up to trusted third party APIs with consumer consent.

The Central Bank approved the Brazilian Open Banking project in early 2019 as part of a broader modernization agenda of the country's financial system. At the time, the plan was that the project would start in the second half of 2020, a timescale delayed due to the COVID-19 pandemic. The implementation process started in February 2021.

According to a study published earlier this month, the majority of Brazilian consumers still feel uncertain about sharing their banking data in exchange for better deals and benefits such as personalized offers under the open banking model.

The research by NPS Prism carried out by consulting firm Bain & Company on open banking in the insurance sector found that 59% of consumers in Brazil are not planning to share their data with financial services companies.

Factors behind the hesitancy include consumer unwillingness to share their data with businesses (35%), followed by 34% who cited lack of trust in relation to the security processes behind open banking. In comparison, 33% fear receiving too many cold calls and approaches from companies.