Raidiam’s Product Manager, Christian Eloysio, discusses the recent announcements made by the Central Bank of Brazil and the National Monetary Council of Brazil regarding changes to the world’s largest data-sharing and financial ecosystem, Open Finance Brasil.
Recently, the Central Bank of Brazil and the National Monetary Council of Brazil announced some important changes to Open Finance Brasil. Among other updates, the announcement focused on two main objectives: establishing the regulatory framework for the Open Finance definitive structure and increasing user adoption.
Two important changes to Open Finance Brasil
1. Open Finance Definitive Structure
To enhance programme governance, the Central Bank of Brazil announced the establishment of a central governance body. Previously, the project was managed through the “Initial Structure,” which was intended to be temporary. Four years on, there is now a dedicated team, similar to the Open Banking Implementation Entity’s role in Open Banking UK. With this team in place, we expect to see even more efficiency in programme processes.
2. Increasing User Adoption
With over 43 million active consents – more than double compared to last year – Open Finance Brasil is growing fast. To keep this momentum, the main changes announced are to make more data available within the national programme and to also improve the overall customer experience.
2a. Increasing Data Available through Open Finance
To increase the breadth of data available through Open Finance, the Central Bank has announced a change in participation rules.
Initially, only the largest banks were required to join, which ensured that the majority of Brazilian citizens could share their data as they likely had banking products with one of the major banks.
However, key markets like investments and foreign exchange were left out as they aren’t managed by the big banks. This meant that, although investments and exchange APIs were available within Open Finance, data wasn’t being shared as the key players weren’t part of the ecosystem.
Now, these companies will be mandated to join Open Finance, deepening the programme’s goal of giving end-users control of their data and a more complete view of their digital financial self.
2b. Improving Customer Experience in Open Finance Products
Open Finance reports have shown that the major friction point in the customer journey is redirection, where the customer is sent to their bank’s app to authorise the data sharing or payment transaction. This extra step often makes users quit the journey. To address this, efforts are being made to provide alternatives to user redirection, which is currently required by the authorisation code flow.
What are the new No-Redirect Journey features?
The first step towards these improvements began last year when customers were allowed to pre-emptively consent to share data for products they did not yet have, such as credit operations, investments, and exchanges. This way, if a product is acquired in the future, the customer would already have granted consent to share the data with the third-party provider (TPP) without additional redirections.
The second is the consent extension feature, which eliminates the need for redirection if the customer wants to extend an already granted consent for data sharing. The TPP can send a request to the bank to extend the consent expiration date, while also logging some risk signals to the bank.
In addition, the release of the third version of the Consents API, has enabled ‘indefinite term’ consent. This means that the customer is only redirected once in their lifetime unless they explicitly revoke the consent.
At the beginning of this year, these new features were also extended to payments. The Sweeping Account Product was released to the ecosystem, allowing the customer to be redirected only once to set up transaction limits. This means that the TPP can execute payments on behalf of the customer, as long as both the debtor and creditor accounts are in the customer’s name. However, the Central Bank’s latest announcement brings yet another improvement to the customer experience.
An API, called “No Redirect Payments,” will enable customers to make payments to any account without any redirection, after the user’s device has been enrolled. The API had already been released to the ecosystem in October last year and was optional until now. However, the Central Bank has now announced that it will be mandatory in the second half of the year. Last month, the first institutions were finally certified for functional compliance and approved for production by our Raidiam Assure Team: Picpay and C6, two digital banks.
This means that the vast majority of banks will need to allow payments to be made without needing the customer to authorise each one. The TPP will send risk signals to the bank, which will decide whether to execute the payment or not, similar to how credit card payments work. As with other payments APIs, the No Redirect Journey API will use Brazil’s instant payment infrastructure, PIX, which enables customers to make transfers from their digital wallet with no intermediaries.
Open Finance Brasil continues to advance
Although there are still some questions regarding the liability and technical risks of these new features, it is a clear step towards enhancing the customer experience and making Open Finance available to even more Brazilians. Open Finance Brasil is already known as the most advanced ecosystem of its kind in the world and shows no signs of stopping.
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.
