Open Finance: understanding the basics

Definitions, how it stands today, and what the next innovations will be.

Definitions

Until recently, a financial institution could not see the relationship that customers had with other institutions. With Open Finance, financial institutions gain access to customer relationship data with other institutions, which allows them to offer products better suited to each customer’s profile, as well as reducing credit analysis time and increasing transaction security.

Differences between Open Banking and Open Finance

Open Finance is the expansion of Open Banking and the project’s name change. Now, not only information about traditional financial products is shared, but also information about investments, insurance, pensions, and more. However, all data security and privacy requirements remain the same, with the customer staying in control.

What we can do today

Currently, we can perform various operations thanks to Open Finance, such as:

  • Access to open data on financial products and services: information about interest rates, fees, credit limits, among others (without customer data).
  • Sharing of registration and transactional data: if they wish, customers can request the sharing of data from accounts, investments, and insurance. It is possible to cancel sharing at any time.
  • Payment transaction initiation: starting transactions (such as a PIX) directly within the desired financial institution’s app, facilitating payments in online stores.

Open Finance also stimulates competition, which can lead to lower fees and an improved user experience, as they can view all their accounts in a single place.

In the future

Through Open Finance, other innovations will be possible:

  • Interoperability with Open Insurance: easier and faster access to insurance and pension products.
  • Credit operation proposal forwarding: allowing customers to compare credit offers available in the market and choose the best one for their profile.

Migrated post from Medium.