Open Finance: all about the system

Everything you need to know about Open Finance

---

One of the main new developments for the financial market in 2021 is Open Finance. 

This facility aims to offer better conditions for consumers, which will consequently increase competitiveness and innovation within financial institutions.

Open Finance is a change adopted by the Central Bank that will benefit the population in general, in terms of digitalization, technology and security, bringing several opportunities.

But after all, do you know what this term means and what the main changes are?

That’s what you’re going to discover now! To better understand the concept of Open Finance, continue reading.

• 

What is Open Finance?

Open Finance is a new system that aims to reduce bureaucracy in banking solutions.

In this way, it will bring benefits to both customers and financial institutions.

Furthermore, Open Finance will replace the current Open Banking model.

According to the Central Bank itself, the new program will have a positive impact on banks and other financial systems, such as investment brokers, insurance companies, exchange companies, among others.

In other words, the concept encompasses several financial products, not just banking ones.

This means that in practice, Open Finance will revolutionize the entire current financial system.

---

How does Open Finance work?

Open Finance will reduce all information difficulties. 

This means that account holders, regardless of whether they are considered individuals or legal entities, will be able to use their data in a much more efficient way.

The system, in addition to being essential for increasing the transparency of information, will also help customers understand their main rights in relation to data.

This initiative works by sharing data that goes far beyond banks, which already have the capacity to encompass other institutions that can offer good resources to consumers.

Regarding the participating institutions, all must be regulated by the Central Bank and follow the project guidelines.

---

What is the difference between Open Banking and Open Finance?

To better understand the difference between the two concepts, you first need to know what Open Banking is.

Open Banking allows consumers the opportunity to learn more about the various financial products offered by institutions regulated by the BC.

Through it, consumers can allow the sharing of their data between authorized institutions.

In other words, the account holder has greater control over their data and transaction history.

And the big difference between Open Banking and Open Finance is that previously, it was only possible to share data between financial and payment institutions.

But with Open Finance, all this changes for the better. Now, the client can take their history to another player in the market and, thus, obtain more advantageous resources.

---

What will change from now on?

The one who benefits from this change is the consumer. 

After all, competitiveness makes companies become more innovative and find more effective solutions to satisfy customers.

In other words, participating institutions will be able to offer products and services taking into account the actions taken by their main competitors, bringing more advantageous and innovative resources.

The consumer will also have much greater control over their financial situation. 

This is because if he has, for example, an account in more than one institution, he will be able to access the information in a single place.

This way, the consumer will have more practicality and autonomy.

When does Open Finance start?

In fact, Open Finance has already started to be implemented.

But it depends on the first phases of Open Banking to work correctly.

However, it is important to mention that it is not possible to use Open Finance resources until the project implementation is complete or at a more advanced stage of development.

Therefore, we can say that from the 4th phase of implementation of Open Banking, Open Finance will be improved.

This phase involves sharing data on various financial products, such as investments, private pensions, among others.

---

What are the four phases of implementing Open Finance?

It all starts with the first stage that began in February 2021.

At the beginning of implementation, banks provided public access to information about products and services.

Already in the second phase, Care must be taken with the most sensitive data, which can only be shared with the user's authorization. This data refers to the registration of customers and representatives.

The objective here is to bring more security and stability to the process.

In the third phase, payment offer initiation services will be shared.

In other words, consumers can now use intermediary apps to pay bills and make transfers. This way, they are not “tied” to the tools of a single institution.

Finally comes the fourth phase of implementation, which will expand Open Finance.

Open Finance is expected to be fully implemented in 2022, which will represent a major revolution for the country's financial ecosystem.

The Central Bank is creating an innovation strategy by implementing this initiative in Brazil. This process will completely change the relationship that consumers have with banks.

---

Open Finance opportunities for the market

There are several expectations regarding the business opportunities that this initiative can provide.

Currently, there are some barriers to entry for financial services.

This scenario has certainly evolved a lot in recent years. However, with Open Finance, it can improve even further.

Additionally, all financial planning and education features could become more interesting to users.

In fact, if the main basis of Open Finance is Open Banking, which is the sharing of banking data (with due authorization from the customer), the idea is that the owner of the information is the consumer himself, not the financial institution in question.

Conclusion

As you can see, Open Banking will optimize banking services and financial products.

This way, the customer will have more autonomy and a more practical experience, capable of bringing several benefits to their financial life.