Chile fintechs in open banking push

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Wednesday, March 13, 2019

In Latin America, banks and fintechs are forming alliances – but widespread collaboration is still not being seen.

However, despite current resistance seen in some quarters, their respective futures could be inextricably linked.

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By joining forces with fintechs, banks can quickly and efficiently build their digital muscles not only to meet the demands of today's tech-savvy consumers but also to prepare for a possible incursion by a BigTech firm into the region's financial services space.

Then there is open banking, where banks allow clients to safely share their own transaction data with third parties, which, in turn, can use this to deliver innovative and tailored solutions.

In the words of global law firm Pinsent Masons: "Open banking provides great opportunities for all sorts of businesses, including existing banks and fintechs, to innovate, strengthen customer relationships, and gain a share of new emerging financial product and service markets."

Global pioneer the UK is already implementing open banking and there are rumblings on the open banking front in Latin America. Chile's fintech association, FinteChile, is sharpening its focus on open banking and evangelizing its benefits, which also include driving down banking costs for customers and raising the level of financial inclusion.

Beyond educating the public, working with lawmakers, building trust in the technology, and laying the requisite regulatory foundations, for the emergence of such an ecosystem, collaboration, once again, is vital.

FinteChile executive director Ángel Sierra told BNamericas: "Collaboration is very important because, beyond open banking, the future of the financial industry points to an interconnection and convergence between banks and fintechs through APIs or other systems."

The view is shared by Pinsent Masons: "Collaboration between banks and fintechs will be at the heart of the future of open banking."

Sierra said that, at some point, banks and fintechs in Chile will need to sit down at the negotiating table: "The reality is that prior to or during this process, financial institutions and fintechs are going to have to talk, engage in dialogue, build, negotiate – and this process requires a mutual understanding. Therefore, it is very important that there exists a strong predisposition and openness towards collaboration by each party.

"Today we do not know what the perception of the banks is, given that open banking is still not on their radar. What we do know is that there is reluctance regarding fintech regulation. There is therefore an important journey to take in which banks must realize that they can collaborate and establish alliances with fintechs that will benefit the whole market and their clients."

During a press event on open banking, Sierra said authorities have a key role to play in driving forward the process: "In the west, UK, US and all of Latin America, the government has to make this happen." Chile wants to become a financial services hub in the region and Sierra said that open banking should be a part of its associated strategy.

Chile's banking association Abif did not immediately respond to a request for comment from BNamericas.

There have been advances in the area of open banking in Chile. FinteChile, Sierra said, is forming alliances with third parties, among them British open banking consultancy Open Vector.

Also, local heavyweight Banco Bci is working with APIs and Spanish personal finances management app Fintonic has landed in Chile. While not an open banking app, it has similar characteristics, in that it allows a user to monitor in a single digital space their various bank accounts.

Elsewhere in South America, Colombia Fintech has signed an MOU with Open Vector to learn about regulatory best practice. And in Brazil, the central bank is working in the area.