Open Finance x Open Banking: understand the differences

Open Finance is an evolution of Open Banking in Brazil. Find out how the country’s open data sharing environment works.

 

2021 kicked off a new relationship between customers and financial institutions such as banks and fintechs. Open Banking changed the banking system with decentralized financial information and streamlined data sharing, improving personalized product and service offerings. Open Finance rose to prominence in 2022 with further innovations and is considered an evolution of Open Banking. Keep reading to find out how the open financial system works in Brazil.

 

What is Open Finance?

Open Finance began in the fourth and last phase of the Open Banking implementation: the first phase began in December 2021 and the second at the end of May 2022. Brazilian are now able to control and share their data with banks and fintechs and access insurers and investment, FX and pension brokers. These institutions are a part of the  Open Finance environment, providing consumers with a wider range of services. 

 

The goal of the Central Bank of Brazil, the regulator that oversees both Open Banking and Open Finance, is to make financial services more personalized and accessible and offer fairer fees. This will increase competitiveness among financial institutions: every customer can use their data and contract insurance or set up an investment portfolio. 

 

In short, Open Finance includes Open Banking, Open Insurance and Open Investments. Customers will gradually notice the changes: financial institutions, insurers and brokers will offer new products and services as more people share their registration, transaction and operational data.

What is Open Banking?

 

The Open Banking moniker should become obsolete as Open Finance replaces it. Implementation of the open financial system began in February 2021 and is divided into four phases:

 

Phase 1: Participating institutions began releasing information about banking and customer services.

 

Phase 2: These institutions’ customers can apply to share their account, card and credit data, if they so wish.

 

Phase 3: Payment transaction initiators allow money transfers through several platforms thanks to Pix. Customers can request online loan proposals from several financial institutions simultaneously. This phase had the greatest impact on online payments.

 

Phase 4: The Open Banking data set now includes FX, investments, insurance and supplementary pension products and salary account information.

 

According to Otávio Damaso, Director of Regulation at the Central Bank of Brazil, the system has around 800 participating institutions and 5 million data-sharing authorizations.

 

What is the difference between Open Finance and Open Banking?

 

Open Banking and Open Finance are easily distinguishable: Open Banking Brazil has transformed the country’s banking system via banks and fintechs, allowing consumers to share data and access the best offerings. Open Finance, on the other hand, is the more advanced version of this system and covers every type of financial service. In other words: it is an expanded version of Open Banking.

 

Open Finance and Open Banking have similar goals: to provide a more open financial system where every Brazilian owns and controls their data and can share it to obtain better terms from institutions they do not currently work with. 

Bexs Pay helps you tap the Brazilian Market

The Brazilian Open Banking system continues to develop as some of the phases that have already been implemented are being updated. The good news is Bexs Pay has solutions that allow sellers to accept local payment methods – including Pix or boleto – on their international e-commerce platforms and send individual or bulk payments to Brazil. Contact our experts to find out more about our Payin and Payout solutions.