Open Banking: Open banking theme image

Open Banking: Banco Aberto in Brazil

A few years ago before knowing the term Open Banking I went to register on the platform Just Online and they asked for my internet banking password to proceed with the registration. But I got back on my feet and gave up on registering.

A few days later I downloaded an app that also asked for my bank password. Again, I was wary of putting the password, but this time I decided to research if banks have support for this type of service.

But to my surprise I found the term ÔÇťOpen BankingÔÇŁ in several articles listed on google whose objective is to make banks more open. However, this concept has already been used in the European Union and Brazilian banks as Original already has API for developers.

So I, as a developer, was very excited about this technology, it opens up new possibilities for uses in business and personal applications. But as a customer I am wondering if the technology is safe if there are no flaws in the api.

For example I signed up for an application that had my entire bank statement without my bank informing me of it. I believe that soon the banks will fix this and create a token via app or SMS to notify the user when someone is accessing their account but anyway I think this is promising.

image of Steve Buissinne per Pixabay

What is Open Banking

Firstly, Open Banking is a concept that allows the bank to share customer information with prior authorization. As well as Through an API, application programming interface, companies will be able to use user data that banks have.

However, consumers may own their data that can be used to grant loans based on their consumption profile. That would be an important change in the banking market that is already undergoing major changes with fintechs. 

In our country we are afraid of technology even more when it comes to money. That's why many people are hesitant when it comes to sharing information with third parties.

The BCB (Banco Central do Brasil) is studying to regulate this type of service in Brazil in 2021, as already reported in the press. However, it would be amazing because it would give people a boost to lose their fear of using applications that have this service.

What changes

For consumers it would give more security when accessing third-party applications. Because today when we are going to access these applications that connect to banks, we are not sure of the security of our data in these applications.

The problem is that many banks today do not provide APIs for companies to integrate with their ecosystems. Since with open banking it will be possible for applications to integrate with bank ecosystems with security, practicality and transparency.

However, with the regulation of the BCB, there will be a standard of integration between banks, third-party apps and customers. However, instead of you having to type the password, you only need to type the account and the bank and the bank itself will check with you for access authorization.

Participating Banks

In short in press release published on 12/4/2020 the BCB published a list of 1,065 institutions with mandatory participation in the Brazilian Open Banking. However, all 5 large banks, payment institutions, cooperatives and digital banks are included in this list.

From Open Banking to Open Finance

Be that as it may, Open Finance is a natural evolution of Open Banking foreseen in the last stage of implementation of Open Banking in Brazil. With Open Finance it will be possible to share not only bank transactions but all financial data such as loans. investment insurance, etc.

However, in open Finance it will be possible to integrate all banks with an application and from there you will have all the statements and reports of your financial life. As well as being able to have an application that lists all the credit cards of different banks and their respective debts and annuity.

Image shows image of a wallet with money right in the middle of the notebook.
image of mohamed hassan per Pixabay

In this sense, the forecast for the start of the implementation of the first phase of open banking is February 2021, when financial institutions began to share information on products and services with each other. However, in December 2021, the implementation of the last phase is expected to make it possible to share more data between companies.

Final considerations

Open Banking is a concept that will allow the sharing of data that is currently restricted to banks, but despite the central bank guaranteeing data security, there is always that distrust since most security breaches are made by inattentive people.

In summary Opening this data to third parties makes it more vulnerable and more difficult to control and increases security risks. However, with Open Banking and Open Finance, competitiveness among banks increases and makes the financial system more accessible to people.

What is Open Banking?

Open Banking: Open banking theme image

Open Banking is a term borrowed from English that describes a system in which financial data, products and services are shared. According to the definition of the Central Bank (BC), this concept includes the opening and integration of platforms and structures of banks and fintechs ÔÇô the startups in the financial area.

How will Open Banking work?

With the customer's consent, banks and service providers must share their data and information, whether natural or legal person.

How did Open Banking come about?

The concept of open banking emerged just over five years ago in the UK. The British banking system is a little less concentrated than the Brazilian oneÔÇŽ

What is Bank API?

API it is a series of routines, protocols and programming tools that define how different systems should interact with each other. APIs are widespread in applications of the most varied types and are not restricted to financial platforms

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