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Brazil

Open Banking

Open Finance

The largest country in South America has forged ahead with Open Finance.

In 2021, 76% of Brazilians had access to the internet. Most Brazilians use smartphones when accessing the internet. Brazil is a large market with 212 million citizens, 160 million of which are over 18 years of age. There are more than 150 million online accessible bank accounts for Open Banking, and 45 million unbanked to be helped with Open Banking-enabled use cases. 79% of Brazilians view a growing movement toward Open Banking as a positive development. 75% of Brazilians said it was worth giving companies access to their personal data if it meant a better user experience for them. 90% of Brazilians agree that they should have control of their own financial data, and banks should not prevent the movement of their money between other financial services.

Open Banking Brazil consists of four stages, the first of which was launched in February 2021, and the last was implemented in December 2021. It is based on three fundamental pillars: regulation, standardisation and collaboration. The Central Bank plays a fundamental role in Brazil in terms of regulation; standardisation is a responsibility of the associations, and collaboration will be essential amongst the participating institutions and Fintech to provide customised products and experiences to customers.

Open Banking Brazil’s¬†implementation approach¬†(p. 31) includes the foundation of the Brazilian data protection regulation, the LGPD (Lei Geral de Prote√ß√£o de Dados Pessoais).¬†Although built on the same principles and technology approach as the UK‚Äôs Open Banking ecosystem, the accreditation flow for Open Banking in Brazil differs due to the presence of national IDs (‚ÄúCPF‚ÄĚ for Natural Persons, ‚ÄúCNPJ‚ÄĚ for Legal Entities), and the ability to use them electronically. This¬†simplifies the validation processes¬†significantly compared with the UK model, and hence Open Banking in Brazil can be operated more autonomously without additional manual accreditation by a regulator.¬†

The roles and responsibilities set out in Europe under PSD2 are captured directly by the Central Bank of Brazil in the Open Banking legislation.

Brazil has an interoperable instant payments platform, PIX, which is available at any time of the day Рincluding weekends and holidays. PIX is a new payment method in Brazil for instant direct bank transfers, which is built and owned by the Central Bank and operated by the Brazilian banks, digital accounts, and wallets. The account-holding institutions must carry out financial transactions by instant payments initiated from other regulated institutions upon the customer’s request.  

Furthermore, Open Banking Brazil has adopted Financial-grade API (FAPI) and FAPI Certification to ensure FAPI technical conformance needed to meet compliance requirements, which goes a long way toward the interoperability Open Banking relies upon.

The model for retail payments adopted in Brazil is a market-wide approach requiring that most payment service providers (PSPs) seamlessly transfer retail payments among themselves.

According to The Global Findex Database, 84% of Brazilians had bank accounts in 2021, leaving 16% unbanked.

Fintechs in Emerging Markets and Developing Economies (EMDEs) have started to provide services based on consumer data analysis that could improve the financial resilience of low-income populations. This has been seen to actualise in services, for instance, by reducing reliance on overdrafts and other excessively priced credit products. For example, Brazilians can receive service alerts of overdrafts (p. 11) so they can access a prequalified 30-day interest-free loan on balance and benefit from a reduced interest rate thereafter.

The main drivers for Open Banking, according to the Central Bank, are financial inclusion, bringing innovation to the financial system, promoting competition, and improving the offer of financial products and services for the consumer.

The governance structure of Open Banking Brazil particularly boosted the participation of the Fintech sector in the implementation. It comprises three levels: Deliberative Council, Secretariat, and Technical Group.

A Deliberative Council, composed of six representatives from financial associations and one independent councillor, oversees the technical and operational standards of Open Banking Brazil. This Council consists of representatives from banks, credit unions, and financial and payment institutions, and receives proposals from different working groups formed of members from all associations and the Brazilian Central Bank. This ensures that the Brazilian Central Bank has considered a variety of viewpoints before all proposals are submitted for regulatory approval. They approve budgets, dialogue with regulators, determine guidelines for the Secretariat and for the Technical Groups, and also provide guidance on the other issues that arise during the process.

Each chair has the role of defending the interests of its members, in addition to reinforcing the benefits of Open Banking for society, especially with regard to the advantages of a more competitive, accessible and innovative credit market.

  • 1.1: Brazilian Federation of Banks (Febraban)
  • 1.2:¬†Brazilian Association of Banks (ABBC)
  • 1.3:¬†Organization of Brazilian Cooperatives (OCB)
  • 2.1:¬†Brazilian Association of Credit Card Companies and Services (Abecs)
  • 2.2:¬†Brazilian Association of Payment Institutions (Abipag), Brazilian Internet Association (Abranet), and Brazilian Chamber of Electronic Commerce (C√Ęmara-e.net)
  • 2.3:¬†Brazilian Association of Digital Credit (ABCD) and Brazilian Association of Fintechs (ABFintechs)
  • Independent advisor

The Secretariat group aims to organise the work plans and technical proposals presented by the Technical Groups. It is also responsible for managing the budget of the Governance Structure and coordinating all administrative activities, assisting the Technical Groups with demands, and transmitting the status of implementations to the Deliberative Council. Its members are chosen by the Deliberative Council.

The Technical Groups develop studies, technical proposals, and work plans aimed at the implementation and management of Open Banking in the country, always guided by the guidelines approved by the Deliberative Council. Its composition may also include professionals from entities that are not part of the financial world, such as technology companies and academics. Currently, there are nine Technical Groups working on the implementation of Open Banking Brasil. 

It is compulsory for large and medium-sized Brazilian banks to participate in Brazil’s Open Banking initiative. Brazil launched PIX (p. 18), which is a creation of the Brazilian Central Bank. It allows consumers and companies to make money transfers 24 hours a day, seven days a week, without debit or credit cards, with no fees.

In Brazil, banks and Fintechs must achieve accreditation for each functionality they wish to either expose as APIs (predominantly for banks) or to consume as third parties (predominantly for Fintech platforms). Open Banking Brazil offers free access to customer data, transactions and payment initiation services, and TPPs have to share their data as well if they are using bank APIs, as data reciprocity ensures that there is no info asymmetry between the stakeholders.

During the second phase of the implementation of Open Banking Brazil, new products and services have moved from using screen scraping to Open Banking APIs. API platforms surged 147% to 47 in Latin America (p.12), mostly attributable to participant banks in Brazil continuing to roll out new API platforms under the new regulatory framework and corresponding to new Open Banking standards. According to Belvo, 689 Fintechs operated in Brazil in 2020 (p. 13).

The Brazilian innovation ecosystem saw record investments in 2021, and an increase in the offer of jobs, but the skill shortage has slowed down the expansion of many startups in the Fintech sector. According to ManPower, 71% of Brazilian employers are facing difficulty filling jobs. 

Brazil ranked 96th out of 134 countries in¬†Wiley’s Digital Skills Global Index 2021.

Open Banking Brazil offers detailed guidance for consumers and businesses to get involved in Open Banking. The guides include information about privacy and security, implementation process, participation models, onboarding, registration and development resources.

Brazil requires the industry to determine data-sharing standards (p. 21). However, the regulator oversees delegation and must approve the final standards.