Neobank and fintech platform Nubank has emerged as the top recipient of Open Finance, a framework implemented by the Central Bank of Brazil two years ago to facilitate seamless communication between banks and fintechs via APIs. Its ultimate aim is to enable more personalized customer offers while cutting down on financial service costs. More than 800 banks, fintechs and financial institutions now form part of the data collaboration system.
Open Finance is transforming Brazil’s financial system
Nubank has been a frontrunner in this emerging landscape spearheaded by the Central Bank of Brazil and is making the most of the opportunities presented by this framework.
The promotion of innovation and healthy competition is central to Open Finance. The initiative grants individuals and legal entities full authority over their financial data. Consumers have the ultimate say in determining when and with whom they wish to share their data, ensuring optimum privacy and data protection whilst building trusted relationships with financial institutions. Additionally, Open Finance aims to streamline data and service sharing through standardized protocols, making interactions between consumers and financial service providers seamless and efficient.
One of the pivotal goals of Open Finance is to establish fair competition within the financial sector. By creating a level playing field for both institutions and emerging fintech innovators, the initiative opens doors to a dynamic and customer-centric fintech companies. Consumers can look forward to a broader range of innovative products and services competing for their attention, leading to improved offerings and better value for their money.
Nubank obtained 7.4 billion information requests
According to data from the Open Finance governance structure, Nubank obtained over 7.4 billion information requests from other Brazilian institutions, accounting for 46 percent of all communications. In contrast, the country’s largest traditional bank, Itaú, received only 23 percent.
The digital approach taken by Nubank reflects its proactive efforts in the adoption of the Open Finance framework. Neobanks, being newcomers in the banking sector, naturally leverage this system more extensively than well-established banks, which have already secured leadership positions. Fintechs have recognized the value of accessing relationship data to better understand customer habits, driving them to be more active in attracting customers to the ecosystem.
Nubank is using the Open Finance framework to enhance its credit assessment capabilities for card transactions and personal loans. With over 75 million customers in Brazil, Nubank’s expansion into the loan segment aims to increase profitability. The bank has invested in sophisticated data infrastructure and artificial intelligence strategies, giving it unique credit underwriting and financial services capabilities.
Open Finance goes beyond credit assessment
The opportunities presented by Open Finance go beyond credit assessment. Nubank believes it could pave the way for additional products and services, such as consolidating all bank accounts within the same company app.
However, while neobanks like Nubank are leading the charge, the broader financial industry is still in the early stages of fully utilizing Open Finance.
Nubank’s growth trajectory is impressive
As the largest and fastest-growing fintech banking platform worldwide, Nubank has been reporting outstanding revenues, doubling net income to over US $1.6 billion YoY. Led by founder and CEO David Vélez, Nubank’s and banked by legendary investor Warren Buffet, Nubank’s growth trajectory is nothing short of impressive. The fintech platform has extended its services beyond Brazil, with significant growth in Mexico and Colombia. Nuban’s impressive growth has positioned Nubank as one of the most efficient fintech companies globally.
Despite still being a relatively new initiative, Open Finance holds significant long-term potential for the fintech industry. While it may not replicate the rapid success of instant payment Pix, far-reaching results are expected as institutions continue to build the necessary infrastructure and refine the framework of financial services in Brazil to create a more competitive ecosystem.