Raidiam’s Product Manager Christian Eloysio looks at the payments APIs used by the world’s largest data sharing and financial ecosystem, Open Finance Brasil, Raidiam has been involved with this initiative since its launch in 2019 and continues to provide technical support and updates.
Open Finance ecosystems often struggle to demonstrate immediate and tangible value to end-users, particularly with the more traditional use cases such as aiding credit scoring and lending decisions. This in turn can hinder user adoption. In contrast, payments benefit from addressing a direct need – the ability to easily and securely transfer money – presenting a clear advantage when it comes to consumer take-up.
For instance, by the end of 2023, in Brazil, the adoption of PIX, an instant payment scheme, significantly outpaced that of Open Finance, with 159 million users compared to 28 million active consents. This trend is being mirrored globally, prompting many financial ecosystems to take the step of integrating payment services from the start.
To address this issue Brazil’s Open Finance ecosystem, Open Finance Brasil, has implemented three distinct APIs to provide new ways in which to leverage the instant payments infrastructure. These APIs cater to a diverse range of payment requirements, from single instant payments to variable recurring transactions. Each one is designed to meet specific technical needs and, as happens with all APIs in Brazil, must pass the conformance suite tests developed by Raidiam, ensuring interoperability with the ecosystem.
In this overview, I will take a deeper look at those three APIs and the use cases they enable for Open Finance Brasil.
Three payments APIs used by Open Finance Brasil
- Payment initiation API
The payment initiation API, which saw Version 4 go live on 15th April, facilitates the initiation of payments by third-party providers (TPPs) using Brazil’s PIX system. With this API, money receivers can send users directly to their banking app to authorise a payment, skipping the step on traditional PIX where they would need to input details about the account that would receive money.
This API has evolved through four versions to date:
- V1 – Payment initiation
The first version of the API, enabling payment initiation with different PIX methods supported.
- V2 – Scheduled payments
This version brought the possibility of scheduling single payments via TPPs, also leveraging the PIX infrastructure. These payments can be cancelled until one day prior to the debit date.
- V3 – API enhancements
This version of the API was released with many technical enhancements, making it easier to implement and debug. From a user perspective, it defines error codes and validation checks that should be made, avoiding the need to redirect the user where, for whatever reason, the payment could not be executed. - V4 – Recurring payment
New scheduling options were added to the API, enabling daily, weekly, monthly, or custom payments. This means that the customer only gets redirected to their banking app once to provide their consent for all future-dated payments at the same time. This also means that the TPP will send only one API request to the account servicing payment service provider (ASPSP) to allow the payments to be executed. Even after the approval is given, the customer retains the ability to cancel the scheduled payments. All information regarding the payer and payee are defined upon consent creation and cannot be changed afterward.
Typical scenarios for this API include recurring payments such as subscription services or payroll, enabling third-party providers to manage these transactions.
2. Automatic Payments API
This API adds advanced functionality to the basic payment initiation process. The current release of this API, which went live on 15th April, focuses on “sweeping accounts” but it’s expected that new intelligent transfers will be added later this year. This function simplifies transactions between accounts owned by the same account holder, enabling payments to be made without the need for multiple approvals after the initial setup. Customers (consumers or corporates) set up their accounts and transfer limits once, and subsequent transfers are streamlined to a single click.
This functionality could be particularly beneficial in reducing high overdraft fees, which is, on average, 10% per month in Brazil. Both individual and corporate users stand to benefit, with the latter able to swiftly transfer funds across different entities within the same group.
3. No Redirect Journey – Enrolments API
This represents the most advanced API in terms of user flexibility. Its primary goal is to streamline the payment process by removing the step where users are frequently asked to give consent for transactions through redirections. Instead, when a user registers a device the TPP will log specific risk signals to the ASPSP. These signals are then used to automatically grant or deny consent for payments, with the ASPSP assessing the risk signals to make the decision. This significantly smooths out the payment process, making it much more seamless and user-friendly.
What the introduction of payments APIs means for Brazil
This year, we anticipate seeing higher adoption rates from Brazilian citizens using Open Finance as new APIs become operational, alongside the release of additional features to help drive the growth of the ecosystem.
Given that these payment services utilise the existing data sharing infrastructure, we expect payments to remain at the forefront of Open Finance ecosystems globally. The underlying technological framework will be provided by Open Finance; however, it’s the responsibility of the various participating entities within the ecosystem to utilise these tools effectively and create real value for end users.
Interested in learning more about how we deliver trusted data sharing ecosystems in Brazil and beyond? Get in touch today!
Christian Eloysio is Raidiam’s Product Manager and leads the Functional Conformance Suite Project for the Open Finance Brasil and Open Insurance Brasil initiatives. He also actively engages in International Technical Working Groups focused on Open Finance projects.
