Open finance is driving the race to transform the financial market in Brazil

The concepts of open banking and open financing may not yet be familiar to most Brazilians, but you have certainly noticed the practical changes that central bank initiatives have brought about in the Brazilian financial market in recent months. The transformation has just begun and should foster the race between players in the sector to adapt to the new rules of the game.

A practical example of this transformation is PIX. The pay-as-you-go method went into effect in November 2020 and already has more than 200 million registered keys and 80 million users in Brazil. In March alone, there were about 394 million transactions. Since its inception, over one billion PIX operations have been performed.

This system is a result of a revolution in the Brazilian banking system, which is in line with events around the world. Many countries have already made major changes and are an example for us.

The UK case, for example, is the one that attracts the most attention. There, the system went into effect in 2018, effectively raising the quality of services and products provided to customers. Insider Intelligence, a consultancy, estimates that by 2022, about 20% of the UK population will join the new model. To date, more than 5 million Britons use open banking.

But after all, what are open banking and open finance? In short, in Brazil, these are initiatives led by the central bank to put the country’s financial system on a path to unparalleled digitization and transparency.

This “open service” has been regulated by the Central Bank of Brazil to allow data from the customer’s account, such as registration information and transaction history, to be shared in a unified manner – through application programming interfaces (APIs) – with properly organized institutions, in a safe and fast manner – with consent The user of course.

The central idea is to increase the competitiveness of the sector, as well as more practicality and consumer choice. All of this is supported by the LGPD (General Personal Data Protection Act).

While open banking can be described as a first step towards an open financial system, open finance appears as another step in this escalation and should be responsible for moving the Brazilian financial sector even further.

In addition to banks and fintech companies, Open Finance states that other entities, such as insurance brokers, investment platforms, and pension funds, will be able to participate in this system regulated by the central bank. And this is where the real opportunity lies for the companies – and for the consumers, who have become the heroes of this story.

To be aware of the amount of traffic Open Finance can cause in Brazil, a recent study by the German consulting firm Roland Berger estimates that large banks, if they do not adjust their business models, could incur a loss of roughly R $ 110 billion with the implementation of the new system.

Logically, with more transparency and flexibility in the financial sector, the client takes the lead and can transition to players more connected to their needs without major complications.

According to the consultancy, the trend is for institutions to adopt two paths: seeking to increase the relationship with customers or start working as “product factories”, that is, to present a diversified offer and distribute it in third-party channels. The truth is, transformation will be inevitable – and very beneficial.

This is because, on the one hand, the major banks will have to move, on the other hand, there is a plethora of opportunities. This is what the analysis of the American consulting firm Allied Market Research showed. According to the survey, open banking will boost average annual growth in the global market by 24.4% between 2018 and 2026. Thus, the sector is expected to jump from $ 7.29 billion to $ 43.15 billion during the period studied – mainly affected By increasing the services and products provided by the new system.

Source: BC and Sinqia

How to prepare for open financing

Although discussions about the new design of the financial sector have increased in recent years, the truth is that many companies have yet to take major steps towards transformation.

The interest in belonging to the new scenario is real, crucial for survival, but doubts remain about the most assertive paths to follow from now on.

Thiago Saldanha, chief technology officer at Sinqia, the largest technology provider to the financial market in Brazil, is following this shift closely and is one of the references when it comes to open banking and open finance. In recent months, the company has seen express entry for new customers and believes the movement tends to gain traction.

“Everyone who wants to remain relevant to the market has to innovate. This need for innovation will knock on the door, whether to deal with your competitor or even with a customer who is demanding changes. We need to anticipate these movements and be prepared,” says the executive.

Just anticipating market needs in the coming months, the Senqi Establishing an organized strategy on three pillars to serve its clients. The first focuses on the services area, with an emphasis on strategy and financial market support.

The second focuses on products (software) to provide the necessary support for the regulatory phase of open financing, by increasing investment in research and development. This is because the company focuses on analyzing and implementing new technologies, security and performance in products of all sectors, such as banks, social security, unions and funds.

Finally, the third pillar is innovation, which has been fostered through Sinqia’s open innovation program, in partnership with startups and investing in corporate venture capital.

Saldanha also talks about “full service” and says Sinqia is ready to serve clients who need to reshape the business, in addition to those who are arriving now with an emphasis on opportunities.

“We have 500 active clients and there are already a thousand companies that have expressed their desire to be part of Open Finance in Brazil. We are ready for that and believe in the phenomenal growth of Sinqia,” says the CTO.

Changes in practice

Sinqia, which employs more than 1,300 employees, already has significant issues in its portfolio. Saldanha gives some examples, like the example of a large bank that has hired the company to update nearly 100% of the solutions.

“We take care of all PIX services, open banking, and mobile banking integrations. We are essentially helping this bank reinvent itself through an advisory service and providing systems and tools,” says the executive.

There are also clients who rely on Sinqia to reshape their business structure. “We serve a large bank and help implement task forces and target work teams with the aim of offering solutions in a more flexible manner and ensuring market share in times of intense competition,” he says.

Young clients are also on the list of cases and Saldanha says the company is helping them by introducing cloud systems that meet new market demands. “For example, it is no longer necessary to purchase a license. We are responsible for operating the PIX for the customer and he can dedicate himself to the true essence and business strategy,” he says.

On the list of solutions, Sinqia also offers inbound services for expats, front-focused tools like granting credit, facial recognition, and electronic signature system. In other words, a whole suite of products designed for digitization.

In addition, Saldanha confirms that Sinqia provides complete consulting to companies to find out how to join Open Finance, create personalized maps of opportunities and risks and help the client understand the role that this development will have.

In a second step, Senkia will also provide the basic regulatory part required by the central bank to its existing clients.

We are also in the process of closing partnerships and investing in companies that have solutions to operate open banking and open finance. The CEO concludes that we have a history of growth through acquisitions, and we have already made two this year, and we are always looking for the best opportunities. ”

To enter this ecosystem and benefit from your company through open banking, call With Senqiya experts!

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