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No Open Banking

A South American country with Open Banking regulation in its sights.

The Internet penetration rate has grown steadily over the past years, and in 2022, 69% of Colombians have access to the Internet. Smartphones are widely used in Colombia.

The Unity of Financial Regulation (URF, Unidad de Proyección Normativa y Estudios de Regulación Financiera) and the Ministry of Finance developed a decree in 2021 for the regulation of Open Banking. The decree specifies the rules around the exchange of consumer data, establishes the administration of digital platforms and services as well as regulates payment initiation services (PIS).

In June 2023, the Financial Superintendency of Colombia (SFC) unveiled its Open Finance Strategy, outlining a plan to create an ecosystem that fosters competition, innovation, and financial inclusion within the country. This initiative received support from the Inter-American Development Bank (IDB) and the Regional Public Good FintechLAC during its development. It also encompasses the formulation of technological standards that will be applicable to both entities under SFC’s supervision and external third-party entities.

By treating this framework as a “public good” within the financial landscape, it is expected to enhance competition, expand financial access, and empower consumers to control their own data while maintaining robust technology and cybersecurity standards.

As a pivotal move in the adoption of open finance in Colombia, the SFC has issued a preliminary circular that serves as the foundation for data exchange to enable various use cases such as payment initiation, financial portability, and product aggregation, among others. This strategy is aligned with Colombia’s Data Protection and Habeas Data Regime, as established in Laws 1266 of 2008, 1581 of 2012, and 1328 of 2009.

It is expected that the roadmap will be implemented by 2025.

Interoperability is seen as essential for future financial developments in Colombia. Financial inclusion in Columbia is limited due to reduced interoperability and restricted access to savings accounts and other financial products. There is ample scope to improve digital delivery and the use of interoperable payment systems to improve efficiency, safety, and financial inclusion outcomes. 

The model for retail payments adopted in Colombia is a focused approach in which interoperability is required or encouraged, either for only a given set of payment types or for only some payment service providers (PSPs).

Open Banking is expected to promote financial inclusion in Colombia. According to The Global Findex Database, 60% of Colombians had bank accounts in 2021, leaving 40% unbanked. In 2020, the COVID-19 pandemic made it evident that financial inclusion is limited due to reduced interoperability and restricted access to savings accounts and other financial products. The pandemic accelerated financial inclusion as the number of unbanked population has already reduced with the introduction of government programs such as the Ingreso Solidario, which assisted over three million families, representing around 19% of the total population. The programme employed a hybrid approach, first sending funds directly to the accounts of banked Colombians, then using digital wallets to reach the 1.5 million unbanked. 

The key motivations for Open Banking are to promote financial inclusion and the technological development of Colombia to continue promoting the country as a technology and investment hub. In addition, the promotion of the efficient transformation of saving and investment, consolidation of financial security and stability, expansion of access to the payments system and strengthening of institutions are mentioned in the decree

The goal is to build better products for consumers, which allows efficiency and greater access for everyone. 

2021 saw an increase in collaborations and partnerships between Fintechs and incumbent banks as regulators encouraged a “sandbox approach” to the implementation of Open Banking. 

In 2021, the Ministry of Information Technologies and Communications set up an investment of $2.5 million to promote education in the technology industry. As a result, the Ministry of Information Technologies and Communications expects to surpass the talent gap of more than 112,000 programmers by 2025. 

Colombia ranked 85th out of 134 countries in Wiley’s Digital Skills Global Index 2021.