Syncfy Open Banking

An overview of Open Banking in Mexico from the perspective of its players in “Open Finance Tribe MX”

April 30, 2024

Open Banking is aimed at transforming the way we interact with financial services, boosting accessibility, innovation and competition. However, in the case of Mexico, the path towards this evolution has been slower than expected, despite the first steps taken with the Fintech Act in 2018.

As the world moves toward a more open and collaborative financial ecosystem, Mexico is lagging behind in the adoption of Open Banking initiatives. While the Fintech Act laid the groundwork for this transformation, the lack of clear regulations and inaction by the authorities have limited the potential for innovation and growth in the sector.

The report “Exploring New Horizons: Risks and Opportunities of Open Banking in Mexico”, produced by PwC Mexico, provides a comprehensive view of the current situation and future prospects of open banking in the country. This report, promoted by the Open Finance Tribe MX community, reflects the commitment of various players in the sector to turn this trend into a reality for Mexico.

Among the fundamental issues that the contributors to this report are: 

Collaboration, a key mechanism

Collaboration between banks, Fintech, regulators and other actors is essential to promote a successful implementation of Open Banking. Strategic partnerships will enable participants to take advantage of the strengths of their partners and offer better products and services to end users.

In the area of financial inclusion, Open Banking has the potential to democratize access to credit and other financial services, especially for underserved segments. Fintech, as catalysts for transformation, must collaborate with banks to offer innovative solutions that streamline credit processes and improve conditions for customers.

Regulation, progress and pending tasks

With the enactment of the Fintech Act, Mexico was among the countries that promoted the mandatory adoption of Open Finance. However, its full implementation has not been possible due to the fact that much of the regulation in charge of Mexican financial authorities has not been issued, which has kept the industry in a gray area and has slowed down the development of open finance.

The authors of the report are optimistic that Mexico will be at the necessary level in the short term, allowing the market to take full advantage of the benefits of Open Finance.

The role of consent 

Trust is the foundation on which the world of Open Banking is built. In this new financial paradigm, security and control over personal data are non-negotiable imperatives for users. If they don’t feel sure that their information will be treated with the utmost respect and security, they simply won’t participate.

That’s why customer consent, the authors say, is a crucial aspect that cannot be overlooked. Entities that immerse themselves in the universe of Open Banking must be fully aware of the importance of implementing best practices related to customer consent. 

Governance and data exchange

In Open Banking, the government emerges as a fundamental pillar to guarantee its operation. This concept encompasses interaction between various financial institutions, data sharing and adherence to common standards, all under a centralized framework that establishes precise rules and protocols. The essential elements of this governance include a robust regulatory framework, standardization and efficient operational management, including both monitoring and accountability.

In this context, transparency and clarity in the assignment of responsibilities are critical. It is essential to precisely define the roles of each player involved in this ecosystem, from financial institutions and third-party service providers, to regulatory and supervisory entities, to ensure a clear and coherent, fundamental structure.

Closing the gender gap 

One of the biggest obstacles for women in accessing finance has been the scarcity of data. Open Finance offers an innovative solution by expanding the collection of data on this population sector, allowing a more accurate assessment of their credit history and financial behavior.

Implementing digital onboarding processes and risk assessment systems based on direct data from sources eliminates gender bias when making financial decisions. This evidence-based approach opens the door to greater inclusion and fairer and more equitable decision-making for women.

It is also crucial to incorporate women into leadership roles and in the process of designing financial products with a gender perspective. Their participation not only ensures the creation of a more equitable environment, but it also drives innovation.

Improving financial services

Open Banking has aroused great interest in Latin America because it offers a plethora of benefits for all actors involved in the financial ecosystem, and opportunities for banks and Fintech, users and countries in general.

First, banks and Fintech companies benefit from having the opportunity to generate new revenue models through the creation of data and payment APIs. This allows them to adapt to an increasingly competitive environment and to offer innovative products and services that meet the changing needs of users.

For users, Open Banking means improved access to financial products and services, as well as to more personalized promotions. In addition, the increase in digital payments through account-based transfers in Latin America is being largely driven by Open Banking, which offers greater convenience and security in financial transactions.

For Open Banking to be successful, it is crucial that countries learn from the experiences of previous implementations and overcome any political and implementation challenges that may arise. Fortunately, today there is greater clarity about these challenges, allowing countries to prepare properly and make informed decisions.