How are credit unions in the age of open banks?

Cooperatives play a fundamental role in the Brazilian financial system, particularly with regard to democratizing access to various banking services exclusively for their members. In this sense, the implementation of open banking in Brazil will bring new opportunities and challenges to these associations.

In the UK, for example, a large number of credit unions are already working with the new system as part of their loan approval processes, reporting benefits such as greater accuracy and speed in access checks and credit risk assessment.

Here in Brazil, we are entering the third phase of the implementation of Open Banking, a phase that represents the sharing of tools to facilitate transfers instantly. And all of these tools offered by the new system will not only allow for greater speed in operations, but will also allow credit unions to offer products, such as loans and investments, that are customized and adapted to the needs of their members.

Transaction data can still be used so that cooperatives can better understand a member’s income and expenses, simplify credit checks and eliminate bureaucracy, such as face-to-face interviews and paper documentation. In turn, it helps members understand their finances, and spot the first warning signs, including frequent use of payroll loans. Members will also be able to understand their financial situation, including their eligibility for loans and steps they can take to improve their financial health.

Not to mention reducing the time and cost of operations, as Open Banking will accelerate the digitization and automation of operations, significantly reducing the unit cost of loan evaluations. The entire loan approval process can take place online, allowing cooperatives to compete with other credit institutions.

On the other hand, there are challenges to be faced, for example, adapting technological systems to integrate with open banking and redesigning internal processes. Moreover, it will be necessary to devote human resources to oversee this new job front, which should view the new system as a great opportunity and not just an organizational commitment.

Another important point is adapting or acquiring systems that allow credit unions to take advantage of all this mass of data that will be available for access. The primary data of banking transactions should be classified to be useful to the sector, in order to generate more business for the organisation.

To solve issues like these and help build an open banking system, cooperatives are not alone and can count on experienced partners to implement Open Banking as a Service, which not only helps with regulatory compliance but also categorizes, enriches and analyzes credit data among other services and products.

Open banking has come to change the way Brazilians deal with their banking details, and soon, we will get used to this open system. And the Brazilian credit cooperative sector has everything to grow at an accelerating pace in this new reality.

* Thiago Aguiar, supervisor of new platforms at TecBan