Author/s: BID | FDATA
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The Inter-American Development Bank (IDB) and the Financial Data and Technology Association (FDATA) have published a study that provides a comprehensive overview of the current state of open finance in Latin America and the Caribbean (LAC) and potential benefits for increasing financial inclusion. Open finance is a financial services ecosystem where consumers consciously consent for their transactional data to be shared between financial institutions, allowing institutions to offer tailor-made services and products.
After an introductory chapter setting the context of open finance, the study explores the potential risks and opportunities of open finance. Three key benefits are highlighted: (i) increased competition, (ii) more significant levels of financial inclusion, and (iii) reduced entry barriers for consumers. Then it provides an assessment of international open finance ecosystems, and deep dives in LAC region open finance development and challenges. Among its findings, the authors state that open finance environments are still in the early stages in LAC region, and that only five countries in the region (Brazil, Chile, Colombia, Ecuador and Mexico) have regulations in this area or are implementing them.
Finally, the study provides industry and regulatory recommendations and best practices for implementing open finance, such as defining the implementation objectives, defining the types of data to be shared, addressing customer consent, and determining governance, as well as establishing technological standards and strengthening institutional capacity.