Brazil’s financial future: between the popularization and revolution of Pix and the untapped potential of Open Finance

The widespread adoption of Open Finance in Brazil depends on a concerted effort to educate consumers about how it can directly benefit them, about the security measures in place, and about how they can control their own data.

The impact that Pix has had in Brazil is undeniable, becoming a positive example for economies around the world. Its success is a testament to the desire and need for financial solutions that are accessible, fast and inclusive, while also reinforcing what is possible with the support of innovative financial technologies. By enabling instant transactions at no additional cost, Pix has democratized access to digital payments in a way never seen before. Not only has this benefited consumers, but it has also provided a significant boost for small and medium-sized entrepreneurs.

In parallel with the emergence of Pix, Open Banking and its subsequent expansion, Open Finance, have emerged as complementary forces, promising to revolutionize access to and control over financial services even more comprehensively. These tools are not only technological innovations, but also catalysts for profound changes in the way people interact with money and financial institutions, which makes their massive uptake important.

However, although these three years of implementation of Open Finance represent a significant milestone in the market, especially in terms of financial data freedom and the promotion of greater autonomy for consumers, it is clear that it is still at the beginning of its journey to gain recognition and adoption similar to that of Pix.

There is no doubt that Brazilians are increasingly willing to embrace new financial technologies. An indication of this is the data from the Central Bank that shows that 42 million people have already consented to the sharing of data. The interesting thing is that this number places Brazil in the world leadership among systems related to Open Banking in absolute terms.

However, in relative terms, there are still few people who have accepted the service. Considering that, according to the Central Bank, about 190 million people had a checking account in 2022, representing approximately 82% of the country’s total population, the number of adherents to Open Finance is still low. This scenario becomes even more evident when compared to the number of users registered on Pix, which exceeds 155 million.

There are several factors that explain these numbers. First, Pix was launched as an immediate solution to a very common and palpable problem. This has directly responded to a day-to-day demand from consumers by facilitating transactions that previously relied on restricted banking hours or entailed fees. On the other hand, Open Finance represents a deeper and more structural change in the financial sector.

While its promises of greater control over financial data and fostering more personalized and competitive financial services are impactful, these benefits are perceived less immediately by the consumer. In addition, there is an issue of trust and security. While Pix has been widely promoted and guaranteed by the Central Bank, Open Finance requires consumers to trust multiple institutions to share their financial data. This can lead to concerns about data privacy and security, especially without a clear understanding of the benefits.

Financial education plays a crucial role in this context. The widespread adoption of Open Finance in Brazil depends on a concerted effort to educate consumers about how it can directly benefit them, about the security measures in place, and about how they can control their own data.

Still, in the discussion about Open Finance, the expectation is that there will be an increase in offers and a reduction in prices. This is clearly positive for the economy and the end consumer. However, for some financial institutions, the need to compete in a more open environment with more attractive prices can also reduce their profit margins and commissions. Such dynamics may cause less incentive for some of these institutions to fully engage in this ecosystem, not encouraging their customers to participate more actively in Open Finance.

Finally, the implementation of Open Finance is a more complex and gradual process. It requires the adhesion and collaboration of several financial institutions, a joint effort to simplify and make its functionalities more intuitive, to highlight the security related to this sharing process, in addition to the creation of appropriate regulations and technological infrastructures.

However, I firmly believe that, with time and the right effort, it will reach a level of popularity and importance comparable to that of Pix, empowering Brazilians by giving them control over their data and how it is used.

This is a pivotal moment for all of us in the fintech sector, to lead, innovate and educate in order to accelerate uptake and maximise the transformative potential of Open Finance. This path, while challenging, is fraught with opportunities to create a more inclusive, efficient, and personalized financial ecosystem.

*Julián Colombo is the founder and CEO of N5, a software company for the financial industry. With a career spanning more than 25 years in the banking sector, he stood out during his time at Banco Santander, where he held global corporate positions and local executive positions in more than five countries. He joined the Commercial Management Committee of the Santander Group after having been Global Director of CRM, Business Intelligence and CT. Julián holds a degree in economics and journalism from the Pontificia Universidad Católica Argentina (UCA).