Today’s banking customers are empowered, and they demand personalized services aligned with the technology that surrounds their lives. Data and technological innovation are very relevant factors when it comes to offering personalized financial services. Open Banking is a trend that is catching on around the world, especially in Latin America.
WHAT IS OPEN BANKING?
In general terms, Open Banking refers to the use of APIs to share consumers’ financial data with trusted third parties, but only with the consumer’s prior consent. These third parties are responsible for creating and making new products and services available to the customer, and to ensure the highest possible security. Innovation is key in this regard – it would not be possible to create products tailored to consumer needs without it.
A study by Visa highlights three major benefits for consumers. The first is to increase effective competition, which allows more merchants to enter the market. Additionally, innovation comes into play, a benefit that accelerates collaboration between traditional banks and third parties. Finally, the study mentions an improvement in the consumer experience while new market players are being added constantly to further optimize the products and especially the implementation of robust security standards.
OPEN BAKING IS DRIVEN BY LATIN AMERICANS
The role of international Fintechs, such as PayRetailers, has been fundamental in the development of Open Banking in Latin America. Fintechs have the innovative products and technology that the main banking institutions in the region are looking for. In this way, Fintechs help build the consumer trust for new digital payment methods.
Take for example the case of Brazil, a country where PayRetailers offers well-known and reliable payment methods such as the instant payment platform PIX. This payment method has been used by more than 112.6 million users since it went live in November 2020. The platform grew exponentially in 2021 and surpassed 40 million transactions in a single day in July 2021. PIX recorded a 16% increase in payments from individuals to businesses. Undoubtedly, these figures represent a great opportunity for international merchants who want to expand their business in the region.
What is happening in Brazil is not an isolated case and may serve as a projection for companies that want to invest in Latin America. According to the study conducted by Market Research Future, it is expected that by 2022 investment in Open Banking will increase to USD 763 million in the region. Globally, a study by Juniper Research forecasts that the Open Banking sector will grow at a rate of over 2,800% in the next five years.
These numbers lead us to conclude that Open Banking fosters a radical change for banking entities. This change will be supported by international Fintechs such as PayRetailers and by the acceptance of a growing number of customers in Latin America, many of whom are accessing the financial system for the first time.