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In the previous article, we dealt with the concept of financial citizenship. This notion is based on four pillars: inclusion, education, consumer protection and participation. In this article, we will look at the relationship between innovation and financial citizenship. The aim is to present the opportunities and challenges that innovation brings to the democratization of financial services and, consequently, to the expansion of social well-being.
Just over a decade ago, money was predominantly paper and bank branches were glass and concrete buildings. The advent of the internet and digitalization has changed this reality. Today, it is possible to have a banking relationship without having to go into a branch or even fill out a sheet of paper. It's also possible to carry out transactions without touching money. All this is the result of innovation.
The creation of PIX is a typical example of financial innovation at the service of inclusion. It only took a short time for this form of instant money transfer to become popular, surpassing other ways of transferring money. PIX favors businesses by facilitating receipts and payments in an efficient and simple way. It also attracts a contingent of informal workers to the financial system who previously only used paper money.
Data from the Central Bank corroborates this good expectation. According to a survey mentioned in the Financial Citizenship report, In the year prior to the creation of this system, around 17 million Brazilians had never used transfers. PIX, started using transfers with the emergence of this modality. This figure gives a clear dimension of the potential inclusion of this instrument.
More recently, Open Banking has come to reduce information barriers by facilitating the sharing of data between consumers and financial institutions. From the consumers' point of view, this sharing is interesting because it allows them to present themselves to different financial institutions and thus negotiate better conditions. Like the Positive Registry, this instrument reduces information asymmetry, contributing to the democratization of credit.
The first surveys on the Open Banking show, repeating the experience with PIX, that Brazilians are willing to embrace these novelties: an article published on the portal Digital Money Report showed that, according to the consultancy Bip, the number of pieces of information exchanged between financial institutions reached 204 million in March.
The creative force of private institutions is a key element in innovation. If it is encouraged by the regulatory environment, it will be even better. In an effort to get closer to these entities, the Central Bank created the Regulatory Sandbox, through which it encourages innovative projects by relaxing the requirements of financial regulation. It is a regulatory environment where new financial products and services can be tested on the market.
According to Financial Citizenship Report, The idea of creating a Regulatory Sandbox emerged in the UK in 2015. In Brazil, this novelty has existed since 2020, creating a channel between the regulator and companies operating on the frontier of financial innovation. This meets the pillar of civil society participation in issues relating to the financial system, and can result in inclusion, diversification of solutions and even competition.
There have been countless examples of innovative solutions put at the service of the population in recent years. These include digital wallets, used to speed up payments and transfers of funds; the marketplaces credit platforms, which make it possible to compare the conditions of different loan and financing proposals; the peer-to-peer; and the so-called “superapps”, which bring together various financial services in the same environment.
Innovation is also in the DNA of the credit bureaus. In addition to the efforts made to make the Positive Registry possible, the sector has developed solutions that integrate CPF queries with renegotiation platforms, giving citizens the chance to find out about any debts and solve the problem quickly and easily. The bureaus' portfolio also includes consultation alerts, anti-fraud and predictive analysis services, among others.
But it's not all about opportunities. Among the challenges posed by the new features, we can mention the technological infrastructure, which includes internet access and smartphones. Only with this infrastructure will we be able to realize the potential gains of digitalization. What's more, we need to deal with a series of new scam attempts and promote digital education in order to inhibit fraudulent actions.
Along with the development of new financial products and services, there must also be a parallel effort to raise awareness and knowledge about new financial instruments, with accessible content. After all, financial citizenship requires that individuals are impacted by what is new and have the capacity, through knowledge and participation, to have an impact on innovative trends.
Financial innovation
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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor
