Open banking is a reality in Brazil, but its full impact will only be felt when more customers consent to share their data, enabling banks to revamp products and offer new services, according to the country’s oldest financial institution.
Banco do Brasil (BB) has started using the data provided by open banking to perform credit limit evaluations for clients, says Pedro Bramont, the state-owned bank’s director for digital business. And in three to four months time, there should be enough customer volume to introduce more initiatives and get a real flavor of the potential of open banking, he tells iupana.
“The number of people that have joined open banking isn’t yet significant enough,” Bramont says. “The actual number of consents is the current barrier, because credit models depend on having a critical mass.”
Open banking is a system under which open APIs enable third-party developers to build applications, websites and services that can communicate between institutions, making clients’ financial data more widely available.
BB is approaching open banking by focusing both on projects that will enhance its current products and services as well as projects with transformational power.
“Optimizing actions don’t change the business model and don’t create new products, but they do improve performance. For example, these projects can help us to improve the accuracy of credit analysis and credit models and allow us to increase personalization,” he says.
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Offering lower interest rates
Further down the line, BB plans use open banking data to help clients make better investment decisions. In addition, if the bank knows how much a client is investing with other financial institutions, it will have a clearer picture of the person’s financial situation and will be able to give better advice and offer them lower interest rates. Open banking will allow BB and others to do this and more.
Bramont also expects the system to open the door to financial data aggregators. BB has already developed one. Called Extrato Multibanco, it gives consenting clients a consolidated overview of their finances, such as bank statements from different financial institutions.
It’s a logical follow-on from BB’s existing app, Minhas Finanças, which was launched in 2017 and shows customers how they are spending the money they hold at the bank.
“It’s an interesting transformation and it’ll enhance customers’ experience by providing them with greater information,” Bramont says . It’s also another example of how open banking will contribute to increased competition and transparency, he adds.
Tailor-made bank products
In the long term, Bramont says financial institutions will pursue customization to offer the best possible experience based on the profile of each client.
“The bank’s dream is to be ‘a bank for each customer.’ For that to happen, you have to understand the client’s financial history and profile, in order to have the right price for that individual,” he says.
With greater information about their clients’ financial footsteps, banks will be in a better position to offer them exactly what they want, when they want it. Currently, it’s hard to get the full picture if a client has accounts with several banks and fintechs. “Customization comes from the knowledge of financial history,” Bramont says.
Still, there are barriers to overcome. Aside from the need for more people to join the open finance system, there are security challenges. “Banks are very concerned about security issues. The development of open banking also requires continuous improvement in cybersecurity and consumer financial education,” he adds.