Colombia's open finance paves the way for user-centric financial ecosystems

In our podcast VNEXT (Remix), we talk to Ana María Tobar, CEO of ADL Lab at Grupo Aval in Colombia, about the progress of open finance in the country and the keys to building comprehensive, customer-centric financial ecosystems

Financial institutions are undergoing a profound transformation. One of the clearest signs is the search for new ways to offer consumers continuous hyper-personalization and experiences that amaze clients and strengthen their loyalty.

In this sense, open finance — the sharing of information between banks and any other financial institution — is seen as an initiative that allows journeys to be tailor-made, thereby transforming interactions with users. Entities are progressively looking to these models to distribute their products in what are broad, diverse digital environments.

"The most valuable thing about this initiative, as we see it at Grupo Aval, is being able to advance along a path that allows us to aid the evolution of digital ecosystems," says Ana María Tobar, CEO of ADL Lab at Grupo Aval de Colombia. "These have become increasingly important as technologies allow companies to expand the scope of their business models."

Although the attention of the financial sector is focused on this process, they are still in the provision of dynamic and frictionless experiences, as highlighted by Capgemini's World Retail Banking Report 2022. The report highlights that nearly half the banking executives surveyed globally acknowledge that the inability to enrich their data means they struggle to deliver optimal digital onboarding processes and personalized products, which affects their ability to generate the wow factor.

In this context, sharing data and interfaces with other industries through open finance is a gateway to significantly improved customer relationships.

As a result, ecosystems are being developed to cross the traditional boundaries between industries and include participants from different sectors in a single scenario. At the same time, they provide customers with the services they need on a single platform, offering them additional value. Grupo Aval takes the same approach, focusing on the products and services that its customers need, the CEO says.

In short, the construction of financial ecosystems aims to produce multipurpose platforms, where actors from different companies and sectors work together to improve business processes. The aim is to offer financial alternatives to individuals and companies from different segments.

Open Finance revolves around the exchange of information and financial services and is not just focused on banks but any organization. It is a way to generate innovative business models and spur the offer of products in third-party applications.

WHAT CAN WE LEARN FROM THE COLOMBIAN EXPERIENCE?

In Colombia, open finance is at an important juncture following the enactment of Decree 1297, a regulatory intervention based on general principles and rules designed to promote open banking and with it, greater competition, inclusion and efficiency in the provision of financial services.

This legislative measure brings with it precise rules for the exchange of data, clear parameters for companies involved in the initiation of payments, while at the same time strengthening user protection in the digital era.

"Colombia has carried out a very valuable exercise for protecting the financial consumer, in relation to these regulatory issues to which we, the banks, have been adapting," says Tobar.

She adds that financial institutions in Colombia and around the world have been gripped by constant change due to the demands of the digital era, and have had to take action in order to remain relevant.

For example, institutions need to forge alliances with companies outside the financial services sector, such as in tourism, health, marketing and telecommunications.

To achieve this — the executive says — the focus must be on financial inclusion and the product portfolio, and constantly customizing the offering as new needs arise. For this reason, she insists on the idea of "being where the client's interests are. Understanding them better in order to take advantage of this hyper-personalization for their benefit.”

In short, what open finance seeks to offer is the integration of financial services into as many ecosystems as possible and reach ever more customers.

The banking system is therefore traversing an important phase of development. In Tobar's words, "other players are beginning to appear: fintechs and digital giants that complement current product portfolios". Consequently, it is up to banks to build technological and business bridges to integrate with these dynamics, benefiting consumers with centralized information, regardless of the number of entities with which they interact.

According to the executive, the key to integration between the different entities is to take into account issues surrounding incorporation, regulation and compliance in each country, as well as protection of the data that users have decided to share.

Integration brings with it advantages that are still evolving, but are already shaping up to be substantial. We are at the dawn of an explosion of personalized offers, more accessible credit and a growing centralization of services from different entities within a single space, among other trends that will bring customers closer to their banks, making them feel like protagonists.