Designed to increase transparency and competition, Open Finance promises greater efficiency in the financial sector, ultimately benefiting consumers and businesses by lowering transaction costs and enhancing convenience, making structural changes in financial services worldwide. In Brazil, this initiative is well underway, with the potential to reshape the financial services landscape through a wealth of new data and insights.

While the country has seen impressive data-sharing volumes, with aproximately 150 billion API calls and data shared from 34 million individuals, the expected transformation has been slow to unfold. Taking UK, a pioneer in the space, as a benchmark, Brazil highlights both the potential and the hurdles for the country. Brazil now surpasses the UK in data API usage and market penetration, however it lags behind in payments.

Opportunities Created by Open Finance

Open Finance’s potential in Brazil is vast, offering notable benefits to both the financial sector and consumers alike.

• Financial Inclusion and Enhanced Credit Access: One of Open Finance’s most promising outcomes is its potential to expand credit access. By leveraging shared data, lenders can develop more accurate risk assessments, enabling a wider share of the population to access credit. With up to 4.6 million new borrowers expected to enter Brazil’s credit market over the next decade, Open Finance could add significant economic value and improve credit scores for nearly 60% of Brazilians. This improvement can lead to more equitable lending practices, allowing financial institutions to better serve underbanked populations, many of whom are deemed high-risk due to limited credit history.

• Innovative Business Models: Open Finance enables the emergence of new consumer-facing solutions such as personal finance management (PFM) tools, account aggregation services, and marketplaces where consumers can access financial products from multiple providers. The model also provides fertile ground for developing super apps, which integrate diverse services into a single platform. With data insights from Open Finance, these tools can empower users with a more holistic view of their finances, optimizing spending, saving, and investment decisions.

• Streamlined Payment Initiation: Payment Initiation APIs (PIs) are transforming how Brazilians make transactions. Open Finance allows third parties to initiate payments directly on behalf of consumers, enabling a new class of services and applications. Although consumer uptake of these APIs has been slower than anticipated, regulatory improvements are set to enhance their reliability and success rates, making them more attractive and effective for users and businesses.

Challenges Facing Open Finance in Brazil

Despite its potential, Open Finance faces significant barriers that are slowing its progress in Brazil.

• Data Utilization Difficulties: While institutions now have unprecedented access to consumer data, many lack the necessary infrastructure and analytical capabilities to transform raw data into actionable insights. This inability to clean, process, and analyze data effectively limits the business value that can be derived from Open Finance, posing a challenge for traditional financial institutions that are now in competition with agile, data-savvy fintechs.

• Payment API Adoption: With PIX already widely used as an instant payment method, consumers may perceive less value in Payment Initiation APIs. Brazil’s existing payment landscape, which includes the widely popular PIX, provides a fast, secure, and simple payment method, reducing the immediate appeal of PIs for individuals. Nonetheless, regulatory measures like minimum success rate requirements for Payment Initiation are expected to improve user experience and drive more consistent adoption.

Current State and Regulatory Developments

As Brazil continues to develop its Open Finance framework, recent regulatory advancements are shaping the path forward. The Central Bank has taken proactive steps to ensure the reliability of payment initiation, with recent regulations setting minimum success rates for Payment Initiation APIs. These measures, along with new functionalities like scheduled PIX payments, are anticipated to significantly boost the practical use of Open Finance, leveling the playing field for both incumbents and fintechs.

Looking ahead, the long-term vision for Open Finance in Brazil includes integration across diverse sectors—potentially expanding to Open Energy, Open Health, and beyond. As the ecosystem matures, it is expected to foster a seamless, interconnected digital environment where consumers can manage multiple aspects of their lives within a single platform.

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