In February 2021, the Brazilian Open Banking initiative later rebranded to Open Finance, started its first phase. Three years later, more than 56 billion clients/transactional data API calls were made, and more than 28 million people consented to share their data. Despite these impressive numbers, one question remains: Has the Brazilian Open Finance Succeeded? Spoiler alert, not yet!

The truth is, that “BOF” is still in its early stages and it will take time to reach its full potential. However, one thing has become clear, Brazil is one of the leaders of this movement. To get a better picture, comparing our statistics to UK (pioneers in this field) provides some interesting insights. Since February 2023, we've surpassed the UK in the number of data-sharing API calls, and by December 2023, our financial system was generating 14 more API calls per banked citizen than our friends across the ocean.

Now, when it comes to market penetration, BOF has reached around 15.7% of the banked population compared to 14.8% in the UK¹.  Despite being three years younger than the UK's initiative, we've surpassed them in levels of adoption, showcasing the Brazilian population's enthusiasm for embracing new technologies.

But we still have a long way ahead. Take Payment Initiation (PI) APIs, for example. We're lagging behind the UK in terms of usage, by the end of 2023 they were making 1.01 API calls per banked citizen, while the BOF was only 0.054, and this is within expectations. Why? We believe that there are four main reasons.

1. The regulator requires companies in Brazilian Open Banking to provide APIs for initiating payments from client accounts they manage. However, they're not obligated to offer payment initiation services themselves

2. There are still issues with Payment Initiation (PI), particularly because it involves multiple steps. Clients often have to switch between different company ecosystems, which often leads to technical breakpoints.

3. Our current APIs primarily interact with PIX, Brazil's instant payment system, which represented in the last quarter of 2023, 90.1% of all transactions and 31% of the transactional volume in the country. For the average user, the benefits of Payment Initiation APIs might not be as apparent compared to what PISPs (Payment Initiation Service Providers) can do to businesses, and compared to what they've already experienced with PIX. In contrast, the UK banked population didn’t have access to an instant, 24/7 payment method before.

The change is on the horizon. The Central Bank normative nº 441 from December 2023 aims to improve this by setting a minimum success rate of 80% for the PI process, which over time might positively impact the numbers. Beyond this, they are continuing to implement new payment functionalities. For instance, the automatic PIX, scheduled to come live in October, can enable myriads of new applications, such as a cheaper and more efficient direct debit or a form of account sweeping that can boost and optimize investments for individuals and companies.

So, it's safe to say that we can expect "BOF" to gain even more traction in the coming years, leveling the playing field among incumbents and fintechs and paving the way for innovation. This presents an advantageous position for local entrepreneurs and investors to capitalize on this growing trend. These are indeed exciting times to be in the ecosystem! For fintech entrepreneurs, the place is Brazil and the time is now.

¹The UK numbers are reported in monthly active users and the BOF in active consents. Since most of banks do quarries almost daily, these numbers can be compared with a high degree of parity.

²Sources: Open Finance Brasil Dashboard, UK Open Banking API Performance Stats Dashboard

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