Open finance is here to stay.
The boom that open finance has gained in the world in the last couple of years is impressive. To better understand the opportunities offered by this industry, we will offer you an overview in this series of articles where we will address the Open Finance world, also considering Open Banking, Open Fiscal and Open Crypto.
In simple terms, Open Finance is a data sharing model that allows financial institutions to share user transaction data, with their consent, with third parties such as Fintech or other financial institutions.
Open banking and finance provide customers with the ability to authorize third parties to access certain personal information or perform certain operations on their behalf, typically through APIs (Application Programming Interfaces). a bridging software that allows two companies to communicate securely.
It becomes increasingly relevant to understand these terms and their benefits for consumers, since Mexico was the second country to regulate open finance in Latin America, the first being Brazil. This has favored innovation and collaboration in the banking and financial sector.
What are the benefits of Open Finance?
The benefits for clients are clear when they have access to better financial products and services that can accelerate financial inclusion; however, to achieve this it is essential to ensure safe and appropriate use of data. Here are just some of the benefits of open finance for users:
- The texts of the Spanish version of the website are perceived as a direct translation from English that does not necessarily correspond to the forms of expression of Latin American Spanish.
- Key concepts are not found in strategic places in the different sections of the website that facilitate SEO positioning, such as Fintech and Open Finance.
- We are not fully communicating the comparative advantages of Syncfy as well as its use cases.
Through open finance, better options are created for the consumer and an ecosystem of new products and channels is created to benefit customers who want a better relationship with banks and financial institutions.
Here is a simple example of open finance applied to banking: if a customer requests a bank loan, the bank has access to the customer’s information about other banks and financial institutions through an API, which speeds up the process while reducing any risk of fraud for the bank. In this way, all friction in the processes is eliminated, leaving the user at the center of the experience and it is he who benefits the most. This same principle of centralizing information not only has banking applications but also fiscal, governmental, monetary, among others. In future deliveries we will address these cases.
Mexico in the world Open Finance
In this digital era that has been strongly mobilized by the Covid-19 pandemic, information has become one of the most valuable assets, making it essential to regulate who can use said information and how. That is why the Fintech Law was created in Mexico.
This law contemplates:
- Open financial data: those data generated by Entities that do not contain confidential information, such as information on products and services offered to the general public, location of offices and branches, ATMs or other access points to their products and services must be open access.
- Transactional data: those data related to the use of a product or service, including deposit accounts, credits and means of deposit contracted on behalf of the Entities’ clients, among other information related to the transactions that the clients have carried out or attempted to carry out. in its technological infrastructure can only be shared with the prior express authorization of these.
- Aggregated data: all data related to statistical information on operations by or through Entities will be accessible to those who have the authentication mechanisms of the Supervisory Commission or the Bank of Mexico.
Why share my financial data?
Easy, although not obvious. The more information the banks or institutions of the ecosystem have, they will be able to develop more and better products to meet the needs of specific profiles. A difference between users and their different needs are those who prefer physical and direct contact with their bank and those who carry out all their movements digitally.
We are all different, we spend differently and we prefer certain services according to different factors. If the companies that develop financial products can know these characteristics in detail, they will be able to develop highly useful and efficient products, and at the same time they will contribute in this way to financial inclusion.
According to the regulation in Mexico, only authorized entities can access your information and only with your consent. For this reason, it is completely safe to share financial information, since technical and administrative mechanisms have been established to ensure that data transmission is regulated at all times.
The future points towards the consolidation of open finance and the growth of Fintech companies to the extent that innovative and personalized services are offered. In just the last two years, the Fintech industry has positioned itself in Brazil, Uruguay, Argentina, Chile, Peru, Mexico and Colombia.
Syncfy has created a solution for every need of the Open Finance world in Latin America. Learn about our products and join the new generation of financial services.