Open Finance: What It Is and How It Works

Much is said about Open Finance and how this technology can change people’s lives for the better. The fact is that technologies change quickly and, with the recent transformations in the world, we have come to rely more on technological resources.

In the banking system, this is no different. There are many technologies being implemented to ensure security and practicality for users, among which Open Finance is part.

Open Finance encompasses many financial services, a characteristic that we understand better when we know that the literal translation of Open Finance means open financial system.

However, it is normal that many Brazilians do not know what Open Finance is about and how it can be related to the daily lives of millions of people.

We prepared this article so that you understand what Open Finance is and how it works. We hope the content is useful and that you enjoy reading it.

What is Open Finance?

Open Finance is a resource that allows you to share information between banking institutions and move accounts through different platforms in a safe and efficient way, all regulated and authorized by the Central Bank.

Open Finance is a project that supports Open Banking in Brazil, being a more complete system that offers better conditions to the financial system in general.

The influence of Open Finance is not restricted to banks, but also to daily services for Brazilians, such as insurance, pension funds, exchange offices and brokerage houses.

In this way, everything goes through the Open Finance system, something that greatly facilitates the Open Banking regulation process.

The Open Finance technology serves to integrate procedures and rules, generating the creation of an open finance market. 

With this, banks are able to have their customers’ data with their express authorization.

How Open Finance works in practice

Open Finance works as a large place with several service options, where the customer can choose which one he wants. It’s basically like a finance services mall.

It is possible to find services and products from several institutions on Open Finance, making it easier for the customer to choose the best option.

The Open Finance system also works as a technological standardization, where several financial institutions can share data in a single environment.

Is reading the content pleasant so far? Then check out this article too: What is the Importance of Protection and Security in a Digital Environment

Using Open Finance in everyday life

To use Open Finance, it is necessary to ask the bank to enter your data in the system.

At this point, find out if your trusted financial institution is credible and if it can share your data safely.

The sharing process goes through a few important steps:

Consent: the customer has complete freedom to keep their data shared by a bank, as well as how long they will be available to the institution according to their consent and personal preferences.

Authentication: the standard login and password that everyone has, being your contact in a totally unique way between the bank and the customer.

Confirmation: only the user can confirm and authorize the sharing of their data.

Implementation: after all the above processes, the target institution, the bank confirms that everything is correct within the steps and confirms that it worked.

These steps are carried out in the Open Finance area of ​​your bank, either through the website or application.

The Advantages of Open Finance

As we mentioned earlier, the great practicality that Open Finance provides to banking service customers with an understanding of the demands of each one of them is evident.

Benefits of Open Finance to customers

Because Open Finance is an open financial system, competition between financial institutions generates more offers, new services and improvements, expanding users’ power of analysis. 

The competition caused by Open Finance should become even greater and generate benefits for the customer, who will have the banks offering, attracting, generating interest in their proposals and services.

Open Finance and practicality

Currently, it is common for people to have an account at more than one bank or services in different locations. With Open Finance, you can check your financial data in one place. 

In this way, it is more practical to share diverse consumer information on a single platform with companies that want the data.

Customizing products and services with Open Finance

As it is possible to have access to customer histories, banks can offer personalized modes of services and products that meet the needs of the consumer.

The bank gets to know more about its history of bank transactions and its consumption preferences, providing more solutions for day-to-day issues.

Data control with Open Finance

Something similar to personalization occurs with data control in Open Finance, as personal information is only shared with chosen financial institutions. 

Thus, it is possible to have greater data control according to your authorization for financial institutions.

Security and privacy because of Open Finance

All data shared through Open Finance takes place online and securely, with full inspection by the Central Bank. 

The Central Bank takes care of all banking processes, being rigorous in the protection and security of customer data.

More financial health with Open Finance

With the expressive volume of analysis of banking services thanks to Open Finance, the customer gains more time to keep their finances up to date. 

After all, processes are faster, from paying a bill when changing financial institutions to the possibility of scheduling payments.

What did you think of the content? Tell us your opinion below in the comments and share this article with your friends who will like to know what Open Fiance is and how it works.Visit our blog and check out more articles that we, from WLA SaaS, have produced about Open Finance, automation of processes and tasks and other related subjects.

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