The United Kingdom was the first country to launch Open Banking in 2018. Since then, several nations worldwide have been implementing similar frameworks for decentralised financial services – one of the most prominent being Brazil.
The local Central Bank started rolling out the Open Banking system – called “Open Finance” in the country to cover services beyond traditional banking – in February 2021.
Since then, Brazil took only one year to reach five million connected accounts, while the UK market took five years to get to the same number, according to the British association Open Banking Excellence.
“The Open Finance framework was structured having customers as the focus point. If they want to share their data with multiple financial institutions to get more credit [for instance], they can,” explained Janaína Pimenta Attie, head of the division at the Financial System Regulation Department of the Central Bank of Brazil.
Speaking at the Brazilian conference Fórum E-Commerce Brasil, she detailed how the system works in the country and the next steps towards a connected financial ecosystem.
A2A Payments
“We want to advance Open Finance to the e-commerce environment,” she said. The introduction of a new transaction modality – the Payment Transaction Initiator (PTI) – is one step in that direction.
“The PTI modality has started to be implemented recently but is already a reality. There are now institutions offering more services than just cash-in – that is, just bringing money from one bank to another,” Attie added.
Traditional transactions demand a third-party company to conclude an online purchase, usually paid by credit card. With the new regulations, virtual stores can now offer account-to-account payments (A2A). That means the money is transferred directly from the customer’s bank account to the merchant’s.
In Brazil, the most common A2A option is called Pix, introduced in 2020.
These types of transactions that happen in the Open Finance environment need a PTI to work. However, the way regulations have been put in place in Brazil, the merchant itself could become a PTI depending on how much volume it negotiates.
There’s one setback, however, that the Central Bank wants to address to offer a flawless experience.
“The e-commerce payment journey using Pix has the following order: first, the customer consents to share the data with other institutions; then they are directed to the bank authentication page; and redirected to the merchant’s website once the transaction is confirmed,” Attie broke down.
“We want to drop the need for redirection [offering a better user experience]. But we are facing security issues to develop this new model. It is a work in progress, and that’s why we have not launched this functionality yet.”
Automatic Debit Payments
Another feature Brazilians eagerly await is the possibility of scheduling automatic debit payments using Pix. These already happen outside the Open Finance system but are subject to several agreements from banks, turning the entire process slow and expensive.
The goal is to make it easy to subscribe to recurrent services that need regular payments, such as water, electricity, and school bills, for example. According to the Central Bank of Brazil, the new capability will be launched in April 2024.
There are other products in development but with no timetable to happen. One is the possibility of making Pix payments similar to credit cards, including protection against frauds like chargebacks. However, according to Janaína Attie, this would probably demand a separate system, which would not be ready in the near future.
Featured image by Marcello Casal Jr/Agência Brasil
Journalist since eight years old, when I would read the newspaper out loud and pretend it was a radio show. Based in São Paulo, I have worked for Brazilian websites as reporter and editor before joining 6GWorld
