Latin America (LatAm) has become a hub for open banking and open finance innovation. In light of this, Colombia’s government has announced a new roadmap to introduce the tech in the country. Article 71 in the roadmap establishes the open data scheme for financial inclusion. This came as a surprise for experts reviewing the financial sector.
Open banking and open finance, is an innovative business model that uses technology to improve access to data of economic actors. With it, financial institutions can better understand the behaviour and interests of their customers. Thus, they can create products and services tailored to their needs. In turn, it allows consumers to obtain better benefits.
“The government’s financial sector projection gives an important role to open finance and banking: this is excellent news for Colombia. It takes the country to a new stage of technological and financial development. Other countries in the region such as Mexico and Brazil are already at this stage,” said Jose Luis Lopez, co-CEO of Finerio Connect and expert advisor on open finance for several Latin American countries, including Colombia.
Inclusion of open data in the National Development Plan is aligned with the objectives and efforts of President Gustavo Petro’s predecessor. Before the arrival of Petro’s government, the open finance law was signed with a regulation order. The Financial Superintendency has arranged dialogue tables with key industry players.
Additionally, this is the first time that the implementation of technology to improve access to and use of financial services by Colombians has been included in a high-level document. “Banks and fintechs should be happy. It’s a good sign that two governments that are ideologically opposed see in open data a possibility to improve the financial conditions of Colombians. The data in the United States and Europe speaks of its effectiveness,” commented López.
Comparing to countries already seeing open banking success
According to Openbankproject, an expert company in open banking in the United Kingdom, in just four months, from November 2021 to February 2022, the number of users of an open banking solution in Great Britain increased by 25 per cent. The number of transactions made with open banking increased more than threefold from one year to the next.
Both Mexico and Brazil are ahead in the region. Both have been implementing this technology in their financial sector for years. In the case of Mexico, for the moment there is only a secondary regulation. It began five years ago, regarding the exchange of open ATM data. This regulation only applies to those regulated entities that offer services by this means.
As for Brazil, according to the central bank and the regulation that came out two years ago, four phases of open banking and PIX, an immediate payment system that in less than two years became the most used throughout the country, were deployed. Closing out the list of Latin countries involved with open data are Colombia, Chile, and Ecuador. They began the regulation process at roughly the same time. However, how it will be developed is still unknown.