Open Banking and its Implications in Mexico

By: Georgina Navarrete, Subject Matter Expert, AxiomSL Mexico

Having the opportunity to group all the financial and operational information of the people participating in the financial sector in one place, will be a reality in Mexico thanks to Open Banking. Until recently, banks owned their clients’ information, which, on many occasions, caused them to have a false loyalty to their financial institution, due to the impossibility of obtaining their own data and taking it to other institutions in search of a better offer of products and services.

Open Banking allows other providers to access information (permanently or for one time only) in a secure and controlled manner through the use of application programming interfaces. of clients in financial entities. In other words, open banking is intended to promote innovation and competition between companies, since financial institutions are “forced” to share information about their clients with their competitors.

This topic is already part of the most relevant aspects of finance and innovation around the world since there are different initiatives to develop the necessary regulation to achieve a total open banking. According to the study The regulatory landscape of Open Banking in the world, in the European Union there are already regulatory requirements (mandatory), in Japan and Hong Kong there is market coordination, in Singapore there is only a recommendation level and on the other On the other hand, as is the case in New Zealand, the same industry can promote the Open Banking initiative.

How are we doing in Mexico?

Given this perspective of world development, on March 10, 2020, the Bank of Mexico (Banxico) published the first rules applicable to credit information companies and clearing houses, for the Open Banking model, which is contemplated in the “Law to regulate financial technology institutions” known as the Fintech Law.

Likewise, on June 4, 2020, the National Banking and Securities Commission (CNBV) issued General Provisions regarding standardized computer application programming interfaces, through which the information is established that, in a first stage, financial entities will be obliged to share through Application Programming Interfaces (APIS).

In Mexico it is contemplated that the data that can be shared will be of three types:

 

Open Banking Blog - data types

Implications of Open Banking in Mexico

The regulatory progress that has been seen during the first half of 2020 contributes to Mexico establishing itself as one of the leading countries in Latin America in the Fintech market, since to date and according to Finnovista’s Fintech Radar, there are around Mexico of 441 companies that offer financial services with the help of technology, being Brazil and Colombia the countries that are in second and third place with 380 and 200 companies, respectively.

With the above, Mexico begins a path to specify previous initiatives such as Open Banking in the United Kingdom, a pioneering country in concept and regulatory scheme since 2014, where its central axes were i) that the data belongs to the consumer and not to the companies, and ii) a dynamic digital economy was required.

However, the Mexican financial authorities will have an important challenge when replicating the Open Banking model for all the entities that make up the Mexican financial system, since, compared to the experience of the United Kingdom, where only the main banks in the country were involved In Mexico, all financial institutions are obliged to share data as long as the user agrees to give access to them. This implies great efforts on the part of regulators when developing and adapting regulations by sector, especially considering those that do not have a robust technological platform for financial services.

Now, when secondary regulation is fully developed and applied in Mexico, there will be great benefits for users, among which the following stand out:

  1. Increase in the supply of financial services, since due to the amount and sources of data that will be available, entities will be able to create products and services tailored to their clients
  2. Access to credits will be facilitated by each client
  3. Increase in the speed and agility of operation of the institutions thanks to the increase in digital processes, and
  4. Companies and individuals will be able to take advantage of your data to negotiate better conditions.

 

Open banking is a bet by financial authorities that consumers will want to share their data in a secure way, however, it must be kept in mind that the scope may be limited in terms of the information that can be obtained, therefore makes it relevant to look for more sources of information (for example: pensions, investments, insurance, among others). Meanwhile, each financial institution in Mexico must ensure that it has a platform that allows it to share the data requested by regulators, which, although in this first stage is limited to sharing information from ATMs, more detail is expected by 2021.

If you want to know more information about the solutions that AxiomSL offers to promote this wave of changes coherently and uninterruptedly in data management and regulatory compliance requirements, contact us here.

 

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