Open Finance, one of the main recent innovations in the Brazilian financial system, already has more than 41.3 million active consents for data sharing, according to data released by the Central Bank at the end of last year. Initially called Open Banking, it was renamed Open Finance when it included insurance, investment and foreign exchange services. Consent means adherence to this innovation because the customer must authorize participation in this ecosystem.

 

Attuned to the market, Insper students Ana Carolina Leal Garcia de Souza, Bruno Freitas do Nascimento Rodrigues, Nicolas Byung Kwan Cho and Thiago Hampl de Pierri Rocha, all from the Computer Engineering program, carried out the Final Engineering Project (PFE) called “Financial Behavior Analysis in Open Finance” in partnership with Dell, an American multinational information technology company.

 

“The aim of this work was to demonstrate the benefits for financial institutions and customers of sharing financial data within the Open Finance framework,” says Fabrício Barth, professor at Insper and the supervisor of this PFE. “For this, the students simulated the financial behavior of the Brazilian population using synthetic data. From there, they created an analytical system for Dell’s financial institution clients to show the differences between having access only to the financial behavior of their own clients versus accessing the financial behavior of those same clients at their bank and at others where they hold accounts.” Dell’s consulting area provides services to financial institutions whose roadmap includes implementing Open Finance and using the data shared in this ecosystem to generate new business.

 

The dynamics of Open Finance empower customers, who can share their data to obtain better terms on financial products and services, such as loans and financing with better conditions, like lower interest rates and credit cards with higher limits. The more data is shared with participating institutions, the better in terms of competition among financial institutions, leading them offer more favorable conditions to customers. Data can only be shared on Open Finance with the explicit consent of the individual or business customer. The different systems of the financial institutions are interconnected through APIs (application programming interfaces), enabling this integrated experience for the customer.

 

Predictive models for credit analysis

 

“The personalization or customization of offers is another very interesting feature of Open Finance. The software created by the students allows this data to be integrated, making it easier to visualize and adopt predictive models, with the support of reports, which enriches credit analysis, for example,” explains Barth. The data used was not real, since it is not integrated with Open Finance, and only served as an example of what reality would be like. “The research identified the consumption behavior and income of the Brazilian population, generating synthetic data, which is not real, but which reflects reality,” says the professor. Finally, the students built an application to gather all the data on a particular customer, making it easier to generate business insights.

 

The PFE, through weekly meetings with Dell’s advisor, stimulated knowledge such as programming, data analysis and machine learning/artificial intelligence. “The machine learning models were developed to make predictions about credit in the future, helping customers’ credit analysis,” says Barth. “As for the students, Dell played the role of the client, coming up with the demand or problem and asking them to create a prototype to solve that business pain. At the end of the semester, they presented the solution to Dell’s consulting team of 14 employees.”

 

Promising market

 

Open Finance could inject up to 760 billion reais into the Brazilian economy and include around 4.6 million people in the credit market, according to a study by Serasa. The expectation, according to the Global Open Finance Index, a report by the Open Banking Excellence (OBE) organization in partnership with Oxford University, is that the Brazilian Open Banking model will soon surpass that of the United Kingdom, a pioneer in the initiative, taking the lead globally in terms of system implementation.