A possible way to democratize banking


Open Banking could involve a series of risks, although statistics to date show that its level of security is higher than that of traditional banking, considers Julián Colombo.


(Expansion) – When an individual thinks about the prices of a bank, he usually focuses on the commissions that it charges him for his accounts or his cards. But there is a second component called the financial margin, which is generated by the difference between the rates at which an institution captures and lends money. This price is less known and is the product of an algorithm, therefore, it is not the same in all banks and for all people.

One way to be able to compare the cost of credits or remuneration would be to consult many banks at the same time. That, and many other things, is Open Finance.


This concept and its components Open Banking (banks), Open Insurance (insurance) and Open Investment (investments) are part of a regulatory movement born in Europe in 2015, which aims to give greater power to the user of financial services through a principle simple: recognize you as the owner of your data.


So let’s review how a bank sets the price, for example, of a personal loan: the interest rate that will be charged includes many concepts, but the most important and variable is the “probability of default” of the debtor. If the bank understands that the customer is risky, it will charge more for the credit.


But Open Finance radically changes this equation. Its central concept is that the client of a bank (say Bank A) can authorize another bank (Bank B) to obtain ALL his information to quote him a loan or any other product.


This system is voluntary for clients and the authorization they provide will always be defined not only in institutions, but also in time and scope. In other words, a customer authorizes “Bank A” to obtain his data, for 30 days, and for the purposes of, for example, offer him a package of products. After this period, “Bank A” can no longer consult the data, nor can it do so for purposes other than those explicitly authorized.


Some of the benefits are: increasing competition in the sector, improving the offer of products and services, giving the customer power over their data, helping to prevent fraud and contributing to financial inclusion.


As well as bringing benefits for both financial institutions and consumers, Open Banking could involve a series of risks, although statistics to date show that its level of security is higher than that of traditional banking.



Among them, attacks on technological platforms that can compromise, due to the fact that the greater availability of data makes the potential hacking more attractive; and systemic risk since, being a highly integrated system, cybersecurity and fraud risks can affect not only a financial institution but also infect part or all of the entities that make up the system.


However, I must clarify that the statistics to date show that the security level is higher than the traditional one.

The future of Open Finance in the region

Latin America seems to be the region with the greatest potential to take advantage of this concept. This is due to a number of reasons: the first is the BATE GAP, which is the difference between the number of people with a smartphone and without a bank account. So the bigger the gap, the more attractive the market is.

To speak with the numbers on the table, 55% of the Latin American population is banked, but at the same time 80% of adults in the region have a mobile phone. This 25% difference is what tempts new companies to enter markets such as Mexico, Brazil, Argentina or Chile.


Without going any further, in Brazil phase 2 of the Open Banking plan has already begun, in which users can authorize the sharing of their personal and transactional data with the financial institutions of their choice. In June of this year, in Mexico the Open Data exhibition for ATMs came into force and it is expected that by 2022 a “second phase” will begin, in which the publication of the secondary regulation for Transactional Data of debit and credit.


I would love to be able to expand on this topic even more, but I do not want to make you dizzy, dear reader, you were so kind to accompany me on this extensive journey. So I will be brief but direct: Open Finance and its variables are a key that opens the door to a new world, one where the inclusion of thousands of people in the financial system is possible, one where users access better offers of goods and services and where banks can expand their product portfolio with customers in mind.


Editor’s note:

Julián Colombo is an economist and journalist with more than 20 years of career at Banco Santander. He founded N5, a company dedicated to digital transformation in the Financial Industry. Follow him on LinkedIn. The opinions published in this column belong exclusively to the author.


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