Brazil’s Open Banking and the impact on payments

Discover new online payment options and check out the data on Brazil’s Open Banking

 

 

The last of Brazil’s four Open Banking phases took effect in December 2021 – including insurance, investment, foreign exchange etc. products and services – and initiated the transition to Open Finance, which means institutions authorized by the Central Bank (BCB) can share standardized data on products, financial information and services.

 

However, based on the third phase, changes brought in by the new system have already been having an impact on payments since October. The first new initiative was to integrate Open Banking with Pix, the instant payment system the BCB implemented in November 2020.

 

Consequently, Brazilian consumers have been getting more accustomed to the system and this has created new business opportunities. Below are some figures on Open Banking in Brazil to help understand how these changes can benefit your e-commerce business.

 

Open Banking and payments: what has changed so far? 

 

Changes started to have an impact on Brazilian e-shoppers following the third phase of Open Banking implementation. On the service side we now have payment initiators, companies regulated by the BCB that can intermediate purchases and sales – carrying out transactions at the user’s request – without becoming involved in the financial settlement, i.e., various platforms, including social media and e-commerce websites and apps can now be used to transfer money without having to open your bank’s app. This is all thanks to integration of the Pix instant payment technology.  

 

A well-known example of a payment initiator is WhatsApp, which received BCB authorization to start offering WhatsApp Pay no Brasil in 2021. From a consumer standpoint, some transaction starting points now include account aggregators, digital wallets and service applications. 

 

Financial institutions like banks and fintechs, as well as tech companies, can also operate as payment initiators provided they are authorized by the regulator and join the Open banking system. 

 

Payments prior to phase three

 

The payment initiator, which is responsible for intermediating the relationship between the customer, store, the bank remitting the payment, the operator of the card being used for a purchase and the bank receiving the payment, depended on the contracts between all of the parties involved to process transactions. A customer who wanted or needed to use the balance from an account at another bank that was not part of this arrangement would have been unable to do so.

 

Payments after phase three

 

The e-commerce payment initiator responsible for the sale can now connect to all institutions where the customer has accounts, even if the bank or card they want to use is not listed by the store. Once the customer has chosen how they want to pay, the initiator contacts the bank holding the money. The bank then confirms the transaction with the customer. Payment is concluded in seconds.

 

Integrated Pix payments and now even easier

 

The third phase began by integrating Pix instant payments into the data sharing ecosystem. This meant is was even easier for consumer to pay using Pix: now, consumers no longer need to even access their bank’s app or internet banking service to make a transaction. 

 

Heralded as a payments revolution, Pix for business is a competitive advantage Brazilian consumers are readily adopting. Launched in November 2020, the Central Bank’s instant payment system started 2022 without around 395 million registered keys. 71% of Brazilians use the system, according to the BCB. 

 

Brazil’s Open Banking system will bring other payment methods on board in 2022

 

Open Banking’s phases 3 and 4 were split into other phases that will be implemented in 2022. This means consumers and institutions have time to develop and become accustomed to the changes. Further steps are expected in phase 3 for payment methods beyond Pix, which has already been incorporated into Open Banking, alongside credit proposal forwarders and a breakdown of data sharing for other financial services in phase 4. Here is the BCB’s calendar:

 

Phase 3:

 

• February 15, 2022: TED payments (bank transfers) and all transfers between accounts held at the same institution
• March 30, 2022: Forwarding credit proposals (available to users who activated the feature in phase 2 and shared their data)
• June 30, 2022: Boleto payments
• September 30, 2022: Current-account debit payments

 

Phase 4

 

• May 31, 2022: Clients who wish to do so can share data on investment, insurance, foreign exchange and other product transactions with other Open Banking participating institutions.

Simplified online payment to convert more 

 

Having a payment transaction initiator integrated into their sales platforms means e-commerce businesses can make the checkout process faster, which can help increase conversion rates. The fewer steps a consumer has to take, the bigger the chance they will give up on the purchase.

 

A payment API could, for instance, avoid the need to provide credit or debit card details. More modern solutions, like Bexs Pay, also let cross-border e-commerce business accept online payments from Brazil – including Pix payments – and let you receive the payment already converted into your currency of choice, anywhere in the world. 

 

Brazil’s Open Banking: more than 1 million data sharing authorizations in just 4 months 

 

Consumers have had the option of sharing the banking details among participating institutions since August 2021 – when the second phase of Brazil’s Open Banking was implemented. According to Brazil’s Central Bank, more than 1 million authorizations had been issued by December 2021.

 

As each Brazilian can issue more than authorization at a time, this does not mean 1 million people have signed up to the system. However, the BCB the figure is within its expectations and is better than the results achieved by other countries over the same time frame.

 

And since Open Banking began, financial institutions or companies developing business models and solutions have created more than 50 million connections. The BCB believes public adoption will gradually increase in the medium and long term as the ecosystem evolves