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Open Finance and its expansion in Latin America

Latin America is currently undergoing a process of digitization of finance that follows global trends in open finance. In this regard, third-party providers are essential for the development of effective payment solutions and management services.

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Latin America is one of the regions where investment in technology and IT development has grown the most in recent years. In this sense, open finance services have become the main area of investment in the banking and financial sector.

Expansion of Open Finance

Open finance in Latin America represents an ecosystem based on the exchange of financial information between different companies, banks and institutions in a standardized manner. This information is obtained legitimately from the activity of users. This makes it possible to improve management services and offer personalized products and services.

At the same time, regulatory frameworks are beginning to be developed based on the legislative advances of the European Union for the sustainability and integrity of financial information. This type of initiative can be seen to a greater or lesser extent in different countries of the region. The objective is to establish criteria for legal security, innovation and digital accessibility.

Regarding the relationship between users and financial entities, banks and companies in the fintech sector, the expansion of open finance guarantees:

  • A deep knowledge of customers 
  • Improved possibilities for customer loyalty 
  • Creation of personalized services

Among the main advantages of exchanging financial information, open finance reduces costs and significantly improves the performance of services.

Discover the benefits of our Open Banking solutions.

Services that have led to the expansion of Open Finance in Latin America

According to World Bank data, in some Latin American countries more than 50% of the population does not have access to traditional banking services, either due to cost or lack of information. It is precisely for this reason that open banking represents a qualitative leap in terms of inclusion and accessibility.

In this sense, investment in the region in terms of open banking services, fintech innovation and digital commerce exceeded 9 billion dollars in the first quarter of 2021. This represents an increase of 200 % in relation to the same period for 2020, according to data offered by the consulting firm CB Insights, a specialist in finance and innovation.

These statistics demonstrate the strong growth of open banking, organized through the services of third-party providers: the use of so-called APIs or application programming interfaces. This streamlines and improves financial services and reduces the necessary investment by increasing the performance of digital services and the segmentation of user profiles.

The following open finance services are the ones that have expanded the most in Latin America:

Digital credit and debit cards

The issuance of digital credit cards, by banks with digital presence and neobanks, is one of the main axes of investment and commercial development.

Many foreign products and services are consumed in this region, such as streaming platforms, marketplaces and investment platforms. These platforms allow making electronic payments and contracting different products such as Netflix, Spotify, Amazon, among others.

Electronic wallets

This banking product represents one of the areas of management with the greatest insertion in the market; in Mexico this means of payment reached 27% of the transactions made by users in 2021.

It is a type of account that does not have a banking license, but functions as an intermediary between the individual, the bank and the merchants where purchases are made. As a result, they are cheaper and accessible from any device.

Buy Now, Pay Later (BNPL)

Literally defined as: buy now, pay later. It is a means of payment that allows deferred payment of products and services contracted online. Precisely for this reason, it is one of the most representative personal financing channels of open finance.

In certain Latin American regions, it represents a possibility of increasing purchasing power and serving a segment of consumers ignored by traditional services.

Digital transfers

As in the case of electronic wallets, these are online services that allow money transfers without having the funds available. They act as financial intermediaries that channel transfers between banks, customers and companies.

There is, however, the possibility of executing this type of operation through the applications and management platforms of traditional banks. This represents a considerable improvement in terms of management and cost of operations.

Payment by QR code

Many companies are beginning to offer this system, which allows payments to be made using QR code readers. This also includes the development of modems and point devices for merchants using this modality.

Latin America is currently undergoing a process of digitization of finance that follows global trends in open finance. In this regard, third-party providers are essential for the development of effective payment solutions and management services.

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