Open Banking: Bridging Mexico’s Financial GapBy Jorge Ramos Zwanziger | Thu, 04/22/2021 - 11:00
There is a gap between credit and debit in Mexico and those that do not use credit might have less access to financial opportunities, warns Nick Grassi, Co-Founder of financial startup Finerio. He states that the open banking model could be a catalyst in closing this gap, according to El Economista.
What Is Open Banking?
Open banking, known in Mexico as open finance, refers to the exchange of financial information among banks and other financial entities, including credit bureaus, fintech, investment funds and retirement funds (Afores), explains Finerio Connect’s website. Current technologies have given these institutions the capacity to exchange data and make all finance processes faster. “This is beneficial for the end consumer but also for the lender, which can be calmer when granting a loan as it can review a person’s expenses or cash flow,” Grassi told El Economista.
The UK’s Open Banking Implementation Agency explains that this model is a secure way to share financial information that could “help customers and SMEs get a better deal, while also giving users a more detailed understanding of their accounts.” Finerio Connect explains that the benefits for users are many. First of all, it allows people that have a bank account to be able to use it for other financial services. Also, it gives users the ability to compare and contrast different benefits from different service providers.
This financial model is overlooked by Mexico’s Fintech law, which explains that financial institutions have to share information concerning open and transactional financial data, explained El Economista. “The gap between those who have information in the Mexican credit bureau and those who have debit cards is being bridged by Open Finance. In other words, there is a high percentage of people who do not have a lot of information on the credit bureau but use debit cards, investments or other types of products and the data can be used to obtain credit cards,” Grassi said.
These information gaps can make the country a good candidate for open finance. “There is a high concentration in the financial sector and rampant dissatisfaction from users and clients. This means that innovation, democratization and leveling the playing field are necessary,” explained Pablo Viguera, Co-Founder of Belvo, in an interview with El Economista. However, the country’s poor banking infrastructure might be a challenge in the implementation of this model, Viguera explained in an interview with MBN. “Both in Mexico and in the rest of Latin America, a challenge is the precarious infrastructure when accessing data from bank users.” Also, some actors in the financial sector might not be ready for it. “Banks put up many obstacles for open banking to become a reality in the short term,” added Viguera.