Practical insights on open insurance and open banking in Brazil

September 2021 | EXPERT BRIEFING | BANKING & FINANCE

financierworldwide.com

On 5 May 2020, the Central Bank of Brazil and the Ministry of the Economy published Joint Resolution no. 01 from 2020, which implemented ‘Open Banking’ in Brazil. According to the Central Bank, open banking enables “the possibility for clients of financial products and services to allow the sharing of their information between different institutions authorised by the Central Bank and the movement of their bank accounts from different platforms and not just through the bank’s mobile application or website, in a safe, agile and convenient way”.

In this sense, the open banking system is based on the assumption that clients’ personal data will be shared with financial institutions (FIs) to facilitate the offering of banking products and services, as well as the development of financial citizenship. Data sharing would be carried out through application programming interfaces (APIs), that is, technological interfaces that allow the input and communication of information between entities in the public or private sectors, such as FIs. This is a regulatory initiative developed by the Central Bank to establish an open banking system in Brazil and to promote innovation in the financial system, through broad competition and the offering of a large range of financial products and services to the public. In addition to the Positive Credit Report Law (Law no. 12.414/11), FIs now have another instrument to access an individual’s banking history, allowing them to understand the profile and risk that clients or potential clients present. It should also be noted that open banking does not run in the face of the traditional Brazilian banking system, which is recognised for its high technical and innovative capacity, but rather complements it, providing greater transparency and access to data than ever before.

However, the open banking system aims to go beyond just banking. Through the final phase of its implementation, called ‘open finance’, it would be possible to implement not only credit transactions through voluntary personal data sharing, but also other measures, such as the execution of insurance and private social security contracts.

The Central Bank of Brazil has divided the implementation of open banking into four stages, characterised by the type of information that will be shared and the purpose of its sharing. In phase one, FIs make data available in a standardised way, through service channels and products and services, including rates and fees for each offer. From phase two, up to 13 August 2021, clients would be allowed to give consent for their personal data to be shared, revocable at any time, for the purpose of modulating and improving a credit offer. In phase three, up to 30 August 2021, credit transactions through the sharing of client information will be possible, allowing access to credit information and offers without the need to access the channels of FIs where there is already a relationship. Finally, phase four – up to 15 December 2021 – known as open finance, would expand data sharing to embrace other purposes.

Open finance will provide a greater range of possibilities, customised experiences, tailored products and innovation. It will allow not only the administration of credit between clients and FIs, but also of “data on other financial services”, namely information on foreign exchange transactions, investments, insurance, private social security and salary accounts.

In accordance with a recent McKinsey study, open financial data can create economic value for both the public and FIs alike. Operationally, these open systems demonstrate a practical solution for safe, agile, accurate and convenient data sharing, always observing the guidelines of the Brazilian General Data Protection Law (Law no. 13.709 / 2018) and considering that clients must have control of their data and with whom it is shared.

By placing the client at the centre of financial operations, it is possible to offer data sharing with different companies through a simple and unified platform. Indeed, broad access to information on products and services for contracting in the market will be made available. Therefore, the emergence of new solutions for financial products and services that are more integrated, personalised and accessible, and with the client at the heart of decisions, will be greatly expanded.

By consenting to providing their data and joining open finance, citizens will have access to chequing accounts, private social security and insurance, all in one place. While data sharing is intended to allow individuals to receive more beneficial and personalised offers, unifying information and making available a list of suppliers should make it easier to compare products on offer, as well as providing innovation and the technological advancement of the entire market.

The open finance system consolidates the Brazilian financial system’s success, bringing even more technology and competitiveness to the sector, from which relevant concerns regarding data protection and cyber security can be extracted. With respect to data protection, it has been established that the client or holder of the personal data may choose which information they wish to share in part or in full, and may revoke their consent at any time. Regarding cyber security, protocols with minimum standards to be followed have been established.

Open finance is an important initiative which will contribute to the realisation, on an even more technological, innovative and competitive basis, of the already advanced and successful Brazilian financial sector, with a focus on banking activity and related offerings, such as foreign exchange, insurance and private social security.

Thiago Junqueira and Claudio Miranda are partners at Chalfin, Goldberg & Vainboim Associated Lawyers. Dr Junqueira can be contacted on +55 (21) 3970 7200 or by email: thiago.junqueira@cgvadvogados.com.br. Mr Miranda can be contacted on +55 (21) 3970 7200 or by email: claudio@cgvadvogados.com.br.

Thiago Junqueira and Claudio Miranda

Chalfin, Goldberg & Vainboim Associated Lawyers