Economy

Brazilian Central Bank start discussing the implementation of open banking and a regulatory sandbox in the country

The first system is crucial for expanding Brazilians' access to financial services; the second, essential to reduce bureaucracy in the country

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  • The public consultation goes until Jan. 31, 2020;
  • Both issues are part of the institution’s BC # Agenda, which seeks to modernize the banking and financial sector in the country.

The Brazilian Central Bank opened on Thursday (28) a public consultation to discuss, until January 31, 2020, the implementation of open banking, an open financial system that allows institutions to exchange, with prior authorization, customer data with each other via specific APIs and standards, as well as the regulatory sandbox, which in practice will bring fewer rules for testing new business, products and services in the finance industry. Both issues are part of the institution’s BC # Agenda, which seeks to modernize the banking and financial sector in the country.

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For both open banking and regulatory sandboxing, the starting point for Brazil is the British experience in these two areas.

Under the open banking concept, financial data belongs to the customer, who can choose to share it with any financial institution so that they can offer them cheaper and better services. Traditional banks and fintechs will be able to offer a full range of products and services not only to their own customers, but to the customers of other institutions, from instant payments to cheaper personal credit due to a deeper and more agile profile assessment.

The whole protocol to be followed throughout this process, both structurally and normatively, is now under discussion in Brazil.

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Sandboxing, in its turn, is a simpler set of standards with less regulatory oversight that enables companies to develop and test an innovative business model, product or service.

The definition of the sandbox aims to encompass both projects developed by startups, fintechs and entrepreneurs in general, as well as projects developed by large companies already established in their markets.

In the United Kingdom, which will serve as the basis for the Brazilian sandbox model, the sandbox takes place through cohorts or cycles of specific participants, promoted by the Financial Conduct Authority (FCA).

The initiative is already in the 5th cycle there. In this model, the proposals to be tested by companies may have a duration of one year. At the end of this period, the company will have three options: receive a permanent license; terminate the project if it proves unfeasible; or request the extension of the tests for another year if the country’s Securities and Exchange Commission (CVM) deems it necessary.