Colombia’s government is looking to introduce open banking to the country on a voluntary basis and is holding a series of workshops with the private sector to advance a regulatory framework.
Open banking, which aims to increase competition and innovation in financial services, involves the use of open application programming interfaces (APIs) to enable third-party developers – fintech companies – to build applications and services. Countries worldwide are taking different approaches and speeds on its implementation.
In Colombia, the government’s unit for regulatory projection and financial regulation studies (Unidad de Proyección Normativa y Estudios de Regulación Financiera – URF), which is part of the finance ministry (Ministerio de Hacienda y Crédito Público), is running a series of public-private sector events to help define and refine its planned approach.
The URF will then move forward on implementing the regulatory framework necessary for the implementation of the chosen model. It expects to have this regulation in place by the end of this year or the beginning of 2022.
The open banking initiative complements other URF initiatives, such as broader modernisation of the country’s payment system. The overall aim is to create a regulatory framework that encourages digitalisation and innovation across financial services.
Voluntary but not ‘complete hands-off’
Should Colombia commit to a voluntary approach to open banking, it would be taking a different route to nations such as the UK, which is almost five years into its open banking journey.
In the UK a dedicated organisation, the Open Banking Implementation Entity (OBIE), was created by the Competition and Markets Authority, a non-ministerial government department, to create security and messaging standards, as well as champion open banking more broadly. The nine largest current account providers (known as the CMA9) were required to create and pay for OBIE, and release their customers’ data in a secure, standardised form (subject to customers’ agreement). More than three million UK citizens and businesses are now using open banking-enabled products.
“I’d say that the main difference between what we’re trying to do here with what was done in the UK is that we want to follow a voluntary approach. I would say we’re closer to the US or Singapore’s approach rather than the UK’s,” José Torres, an advisor at the URF, told Global Government Fintech this week from Colombia’s capital Bogotá.
“Adopting this voluntary approach does not mean that we’re going to have a complete hands-off approach,” Torres continued. “We still can put in place some regulation to facilitate the open banking journey for stakeholders – for instance, fixing standards or providing clear liability rules for those that voluntarily adopt open banking.”
Asked whether the proposed voluntary approach was already confirmed or just the likely route, Torres said: “It is very likely, at this point. This is the option we’ve been exploring so far.”
The URF’s council and finance ministry would need to approve any approach but authorisation from Congress would not be required.
Exploratory workshops underway
The first workshop took place on 25 March, forming a kick-off session for three further workshops being held in April and May. Participants are exploring different business models, implementation options and institutional and regulatory concerns. They are taking place ‘virtually’ and supported by consultants engaged by the World Bank.
The URF released a white paper in December 2020 containing a summary of open banking’s objectives, its benefits and risks, how it has been instigated in other jurisdictions and setting out implementation questions and challenges. Twenty-six organisations responded to the 21-page paper [Spanish language] before the 22 January deadline.
In the UK, the CMA has just run a consultation on open banking’s future governance and attention is increasingly turning to the broader concept of ‘open finance’. The recently published conclusions of am HM Treasury-commissioned Fintech Strategic Review referred to the country’s open banking rollout as an example of financial services innovation that attracts plaudits globally. The report urged the government to ‘continue to progress “open finance” as a mandatory regime.’
“In the long term, the agency [URF] aims to have open architecture for all financial products and services,” Torres told Global Government Fintech. “Given that we are very likely to follow a voluntary approach, the idea is that not just banks jump in, but also any other financial entities that realise the benefits of the model.”
The economy of the South American country, which has a population of about 50 million, contracted by 6.8 per cent in 2020, according to the World Bank.
Check out Global Government Fintech’s dedicated open banking / open finance section
Philippines looks to ‘industry-led’ approach to open finance – Global Government Fintech’s news story from February 2021 on Bangko Sentral ng Pilipinas’ plans
Saudi Arabia to launch open banking in 2022 – Global Government Fintech’s news story from January 2021 on the Saudi Central Bank (SAMA)’s newly published open banking policy
Open banking gets off to slow start in Australia – Global Government Fintech’s news story from July 2020 on open banking becoming a reality in Australia after the country’s Consumer Data Right (CDR) legislation went live