How LatAm Can Lead Global Open Banking Innovation

Following steady expansion across Europe in recent years, open banking is gaining momentum in Latin America. Brazil, Mexico, and Chile have already rolled out frameworks, and Colombia is now moving toward mandatory data sharing. 

While the model promises powerful innovation and efficiency gains, progress has been uneven. But by learning from Europe’s experience–particularly its approach to standardization and regulation–Latin America can not only overcome key hurdles but also play to its unique strengths and help ensure open banking realizes its potential to transform financial services throughout the region. 

What LatAm can learn from the European experience

Europe’s PSD2 and the UK Open Banking Standards laid the regulatory groundwork for secure, consent-based data sharing under open banking by requiring banks to make APIs available to third-party providers. 

Open APIs: The Backbone of Fintech Innovation in Latin America

The standardization has helped reduce compliance costs–especially for AML and KYC–and improved customer understanding and inclusion around open banking. Yet despite these gains, regulation alone hasn’t driven widespread adoption, due largely to the following reasons:

• Enduring fragmentation – Despite strong foundational frameworks, Europe’s digital banking ecosystem remains fragmented, with API rules differing across countries.

• Institutional pushback – Many legacy and smaller banks in Europe have resisted open banking; some due to institutional reluctance, others due to limited resources for digital upgrades.

• Customer friction – Perhaps most relevant to Latin America, customer skepticism persists, with many unsure the benefits of open banking outweigh the perceived data risks.

The limits of regulation and the promise of the LatAm market

Despite strong regulatory frameworks, Europe thus far has struggled to turn open banking’s promise into everyday impact; less than 10 percent of Europe’s population are currently open banking users. As that limited takeup level shows, mandating data sharing is a solid foundation, but not enough to drive adoption on its own.

This is where Latin America can shine. With a total of more than 3,000 fintechs in the market, the region is fertile ground for open banking, already showing strong momentum in addressing the needs of millions of unbanked and underbanked individuals.

Here’s how Latin America can learn from Europe and apply its own native solutions to drive the next stage of open banking:

• Fragmentation – Though difficult to overcome, Latin America has succeeded with region-wide agreements on environmental and pharmaceutical standards. The rise of cross-border players like Nubank and MercadoLibre could also ease the path toward regulatory alignment.

• Institutional pushback – Here, Latin America has a distinct advantage, with less antiquated legacy systems and a higher rate of digitalisation; both the established players and the disruptors are more agile than their European counterparts. 

• Customer friction – Recent progress in digital and financial inclusion shows that users will engage if the experience is intuitive, secure, and brings tangible benefits.

Building customer-centric open banking through ‘Gustanomics’

As Latin America continues to pass new legislation on open banking, banks have the chance to build a system that’s open by design and yet centered on the customer. By learning from Europe’s challenges and through tapping its thriving fintech ecosystem, the region can develop open banking as part of its continuing journey of financial inclusion.

Applying the principles of Gustanomics–need, incentive, status, and engagement–is the best way banks can help accelerate adoption: making open banking services visibly beneficial to users' financial lives, incentivizing and rewarding engagement, offering shareable experiences, and creating engaging app environments. 

And through the fusion of effective, unifying regulation with dynamic market-driven efficiency, Latin America could show the world how to realize the potential of open banking to benefit–and include–everyone.

Contact us to learn more about the LatAm banking opportunity.