June 2020 – Brazil – Rossetti Advogados
The Central Bank of Brazil (“Bacen”) and the National Monetary Council (“CMN”) jointly enacted Joint Resolution No. 01, of May 4, 2020 (“Joint Resolution”), setting forth the basic rules for implementation of the Open Financial System (“SFA”) or, as known, the “Open Banking” model in the National Financial System.
The banks currently work with a model according to which they have total control of the data relating to their clients’ profile, such as credit history, accounts paid on the maturity date, salaries credited, installments, loans, spending profile, and others.
Therefore, the development and offer of products, financial solutions, technology tools and others for each client profile was limited to the bank with which the clients hold their account and data history. In the Open Banking, in turn, these data become part of a single platform that may be provided to other companies, especially Startups and Fintechs, which are then able to create and offer services based on the data integrated by means of APIs (Application Programming Interfaces).
With these interfaces, the user can have an experience automatically connected to several systems and solutions. For example: by using a spending control application created by a Startup, the client may integrate and manage its bank system information – concentrating everything in the same place.
The adoption of SFA is a global trend, and it promises, in the coming years, to revolutionize the traditional banking activity, in order to encourage the offer of new and better services to clients, increase competition among financial market agents, reduce banking transaction costs to end consumers, accelerate the attraction of clients for digital service channels and improve the relationship with clients;
The new regulation allows financial institutions to provide the standardized sharing of data and services, provided the clients previously consent to the sharing of information.
Now that it has been officially regulated by the Central Bank of Brazil, the Open Banking shall be implemented in four phases, following a schedule that will start on November 30, 2020 and end in October 2021:
Phase 1: public access to data of institutions that participate in the Open Banking on service channels and products and services related to cash deposit or savings accounts, payment accounts or credit transactions.
Phase 2: sharing among participating institutions of record information of clients and representatives, as well as of client transaction data relating to the products and services listed in Phase 1.
Phase 3: sharing of payment transaction initiation services among participating institutions, as well as the sharing of services to send credit transaction proposals between financial institutions and corresponding entities in Brazil that may be retained for that purpose.
Phase 4: inclusion to the open banking services other services such as foreign-exchange transactions, investments, insurance and open supplementary retirement plans, allowing that such data be shared among participating institutions, among others.
Finally, there is still no specific regulatory agency for the SFA. Bacen has organized a kind of assisted self-regulation model, through a deliberative council that gathers several market participating associations for these market agents to establish criteria, standards and solutions for implementing the SFA, such as technical standards for the exchange of information, data granularity (which information will be shared in each transaction), conflict resolution and sharing of costs for implementation and operationalization of the SFA.
This is positive, as it allows the bureaucracy or even the excess of state regulation to stop, at this moment, implementation of the SFA, enabling the market to improve the system, based on the experience from the transactions they are carrying out.
Open Banking opens up a wide avenue for innovations that should greatly improve the clients’ experience, bringing more convenience, ease of use or navigation and more accessible and varied services.
This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.