“We’re just at the start of the hockey stick”: David Beardmore on the possibilities of open banking

Open banking is not a new term, in fact, quite the opposite. 

With the introduction of PSD2 all the way back in January 2018, we’ve seen its usage explode to nearly 6m users across the UK and more and more fintechs and incumbent financial institutions alike adopt it.

At the AltFi Festival of Finance 2021, David Beardmore, ecosystem development director at Open Banking Implementation Entity (OBIE) gave us the rundown of just how far open banking has come and what it’s still got left to do.

Slow burner

Looking at the figures it’s sometimes easy to disparage the impact of open banking, but Beardmore wants us to look closer. 

“Looking at the number of digitally active accounts and at the beginning of 2019 it was about two per cent and now we’re up to about five or six per cent. We’re certainly going in the right direction and growing at pace,” he said.

When PSD2 was first rolled out, there were just nine banks mandated to use the regulation, now there are 86 actively providing customer account data, with more than 230 third party providers also active.

As it stands, there are also more than 450 entities currently in the OBIE’s sandbox programme testing open banking-powered propositions, with most of them likely to come to market. 

“Not everything is complete but there’s enough that’s there to warrant real excitement. We’re pleased with the levels of growth but the job is not done.” 

“Open banking isn’t going away, so get used to it,” Beardmore added.

Changing landscapes

With the implementation of PSD2 we saw a shift in the financial landscape that we hadn’t seen in a while, and three and a half years down the line, the landscape is still changing. 

“People tend to think of this as the death of card rails, the traditional high street bank but I tend to think of it more as an evolution. This is the landscape changing and it’s no different to any other evolution or change that has happened throughout banking or any other sector for that matter.”

Beardmore called the acquisition of Tink by payments giant Visa a “validation and shifting of the [open banking] landscape”.

Visa, a traditional card issuer that is constantly trying to break into new sectors, first made a grab of the open banking sector last year when it attempted to acquire Plaid in a now-shelved deal that would have seen the fintech bought for $5.3bn. 

And now, we are seeing more and more government departments get on board with open banking, such as HMRC or the long-awaited Pensions Dashboard that will be a welcome step towards open finance. 

“When you start to see government departments endorsing and accepting open banking payments as the primary means of paying tax, for example, you start to see that hockey stick growth,” Beardmore said. 

“Expectation is unreasonable that open banking seems to be required to make a case for successful implementation within three or four years when many other new technologies and new ways of doing stuff takes a lot longer. There will always be some segments of society that refuse to play with anything new.”

The death of traditional payments

With a lot of people still tentative to share their data, Beardmore wanted to reiterate that PSD2 was brought in for the good of the consumer.

“There is such a logical, sensible compelling case to be able to see the whole picture of an individual’s finances. The object is then the same moving from open banking to open finance to open energy, open telco to open anything else.” 

“If you can demonstrate that you can build that secure trust framework, you can operate with regulated authorised actors in a way that is safe and trusted by and beneficial to consumers with financial data then you can do it with your gas supply, your mobile data etc,” he added.  

And, at the end of the day, change is not a bad thing. Consumers want to access fairer, more affordable financial services and open banking lets them do just that. 

“I use contactless all the time and ten years ago, I wouldn’t have used it or it just wouldn’t have been available. Nobody bats an eyelid now. There will be more and more use cases and more people that mention it.”

Beardmore also said that with the adoption of open banking, we will be able to move to open finance: “Those that can recognise the revolution and adapt with it will flourish.”

“At the OBIE I think we’ve laid a great foundation, but I’m desperate to see it rolled out into everything else.”

With the rise of digital payments and the shift to online, it’s safe to say that both Beardmore and the OBIE want consumers and businesses alike to be more open to open banking.