The Bustling Latin American Market for Open Banking

Latin America requires banks to partner with technology providers that can offer banking and payment-as-a-service capabilities to reach customers anytime and anywhere.

FREMONT, CA: Open banking—the opening of financial markets through technology, data, and the development of new digital products—is expanding rapidly but unevenly among Latin American nations.

On the one hand, nations like Mexico have chosen a regulatory road comparable to that of Europe, where the open banking effort is well-advanced. Still, implementation timelines have not yet been established.

Then, Brazil is implementing a fully regulated open banking model this year. During the fourth phase, starting in December 2021, the project is continuing in 2022. The most recent phase is distinguished by the introduction of open finance, which will permit the interchange of data from investment, pension, and foreign currency services. Recent developments include the introduction of open finance, which enables the exchange of investment, pension, and foreign exchange data.

And on the other hand, countries like Argentina and Peru, which still lack legislation and take a "wait-and-see" attitude, examine the actions taken by other nations in the region.

Consider a comprehensive analysis of the current state of open banking regulation in Latin American markets to stay abreast of these ongoing changes.

OPEN BANKING REGULATION

Specifically in Mexico, the Comisión Nacional Bancaria y de Valores (CNBV) will publish the first open banking rules, as envisioned in the "Ley Fintech" in March 2020. While the regulation is advanced, many unknowns exist regarding implementation and delays in meeting deadlines. The view on the market is that it will likely be some time before regulated open banking becomes a reality as outlined in the legislation, and it is likely that in the meanwhile, innovators and fintechs will opt for the alternatives provided by financial API platforms.

According to their most recent updates, more than 2,200 financial institutions in Mexico should have established APIs to exchange "open data" with third parties by June 5, 2021. This was limited to public information, such as ATM location and product information for each financial institution. The next set of rules will likely concern the sharing of transactional customer data. In 2022, the National Banking and Securities Commission is expected to release this second set of regulations.

According to the World Bank, a large part of Latin America's population still lacks access to banking services; in certain countries, this number exceeds 50 percent. This is one of the overarching goals of open banking, along with promoting financial inclusion and providing users with superior goods and services.

DEVELOPMENT POTENTIAL IN FINTECH

Latin America is one of the most productive places for fintech innovation, which is good news. Several factors explain the fast expansion and interest in the fintech sector in Latin America; these variables will also influence the adoption of open banking in 2022. More than 2301 fintech startups seek a market of over 650 million individuals in 33 countries.

Until recently, offering many fintech services and products that are now garnering finance took too much time and required significant resources and technological development, preventing businesses from accomplishing their objectives.

This has drastically changed with the recent emergence of new financial infrastructure providers, such as open banking APIs, payment gateways, and service aggregators in the region, acting as the underlying building blocks for these new fintech products and services. It enables their growth and accelerates their time-to-market.