Open banking is appealing to financial institutions (FIs) and regulators in many markets, even as the pandemic sweeps across the world.
The European Union’s financial authorities are monitoring how the pandemic may be affecting banks’ and FinTechs’ compliance with rules such as the General Data Protection Regulation (GDPR) and the revised Payment Services Directive (PSD2), for example. Regulators in other regions, including Latin America, are also shaping and announcing plans to enable open banking and better support digital financial systems.
FIs and financial authorities in Brazil, Chile and Mexico are considering how best to apply open banking within their markets, assessing the unique challenges they face as the pandemic affects transactions and consumers’ and merchants’ access to funds. This means the crisis may have large-scale effects on how open banking develops in Latin America.
Regulators tasked with crafting these rules are dealing with other banking and payments shifts in their countries, too. The pandemic is keeping brick-and-mortar branches shuttered and limiting cash transactions as smartphone penetration rises. Many consumers are unbanked, including more than 45 million Brazilian customers, meaning they are likely interacting with financial and merchant entities primarily through mobile channels. Many nations in the region are thus examining their open banking proposals to ensure they address this behavior.
The latest Merchants Guide To Navigating Global Payments Regulations examines how open banking initiatives are developing in Latin America as well as how the pandemic is affecting these moves. The report also analyzes how such rules are likely to change in the next several years as the health crisis alters the region’s online banking adoption and digital payments volumes.
Around The Data Protection World
Open banking is developing quickly in Brazil, where financial authorities recently announced plans to implement an initiative for the country’s FIs. The Conselho Monetário Nacional (CMN) as well as the Banco Central do Brasil, its central bank, have created a four-stage plan to introduce open banking. The first stage is set to take place in November, according to the financial entities, and will detail how Brazilian FIs can store and transfer data across digital customer service channels. The next three stages concern increasingly complex banking layers, with the last phase set to take place in October 2021.
Brazil’s plan to implement a dedicated op
en banking strategy is also drawing more FinTechs and third-party banking providers into its market. Uruguay-based FinTech Prometeo recently unveiled that it will expand into Brazil and Panama, for example. It provides application programming interface (API)-based open banking solutions for other financial entities and services, allowing clients to send and receive data with more transparency and flexibility. These solutions thus offer similar support as those pitched to FIs within the EU, which have been searching for easier ways to share online data since open banking’ implementation in 2018. Prometeo’s product will be available in nine Latin American countries with the addition of Brazil and Panama.
Open banking is also growing outside Latin America, with one recent study finding that the pandemic may have accelerated the digital banking shift in many markets. It determined that 24 percent of consumers have no plans to start shopping within stores in the next six months and will instead continue purchasing and making transactions online. Ensuring that financial entities can swiftly and, more importantly, safely manage the expanding volume of online transactions is essential to keeping consumers and merchants satisfied.
For more on these and other stories, read the report’s News & Trends.
How The Pandemic Is Highlighting Open Banking Challenges In Latin America
Latin American countries such as Brazil and Mexico are continuing to develop open banking rules during the pandemic, and regulators and banks in these countries are analyzing how best to create networks that can address their customers’ needs. Many of the region’s consumers remain unbanked or lack access to traditional banking products, but smartphone penetration is increasing, giving many individuals the ability to make online transactions via their mobile phones.
PYMNTS spoke with Paula Arregui, chief operating officer for Mercado Pago, the payments unit for Argentinian eCommerce marketplace MercadoLibre, and João André Pereira, head of the financial system regulation department for Brazilian regulator Banco Central do Brasil, to discuss how open banking is developing in Brazil and in Latin America as a whole.
To learn more about why open banking must be tailored to meet the unbanked and underbanked consumers’ needs, visit the Tracker’s Feature Story.
How The Pandemic Is Shifting Open Banking Plans In Latin America
Digital banking is a popular concept in Latin America, with one recent study finding that 73 percent of Brazilian consumers would be open to using online-only banks, for example. Regulators within the country are taking this interest — and the changes necessary to secure such digital transactions — seriously, unveiling a four-stage open banking plan to get the nation’s FIs up to speed. Banks, merchants and regulators in Brazil and other Latin American countries must examine how recent events such as the pandemic could change what consumers expect from their banking relationships, however. These customer behavior shifts would therefore necessitate upgrades to upcoming rules designed to keep consumers’ financial information and money safe.
To learn more about how open banking initiatives and regulations could be affected by the pandemic, visit the Tracker’s Deep Dive.
About The Tracker
The Merchants Guide To Navigating Global Payments Regulations, a PYMNTS and Ekata collaboration, is the go-to monthly resource for updates on the trends and changes regarding PSD2 as well as other privacy and data protection regulations.