You were just at the beginning of the hockey stick: David Beardmore on the possibilities of open banking

AltFi caught David Beardmore at the AltFi funding festivals to discuss all aspects of open banking and open financing.

Image source: David Beardmore / AltFi

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

When PSD2 was introduced every January 2018, we have seen its use explode for almost 6 million users in the UK and it is being accepted by more and more fintechs and established financial institutions.

At the AltFi Finance Festival 2021, David Beardmore, Director of Ecosystem Development at the Open Banking Implementation Entity (OBIE), gave us an explanation of how far open banking has come and what is left.

Slow burner

Looking at the figures is sometimes easy to undo the effects of open banking, but Beardmore wants us to take a closer look.

“Looking at the number of digitally active accounts, at the beginning of 2019 it was about two per cent and now even about five or six per cent. We are definitely going in the right direction and growing at a rapid pace,” he said.

When PSD2 was first introduced, only nine banks were authorized to use the regulation, now 86 are actively providing customer account information and more than 230 third-party service providers.

In its current form, OBIE’s sandbox program currently has more than 450 entities testing open bank-based proposals, and most of them are likely to hit the market.

“Not everything is ready, but there’s enough to give it real excitement. We’re happy with the level of growth, but no work has been done.”

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

Changing landscapes

With the introduction of PSD2, we saw a change in the financial landscape that we hadn’t seen in a while, and three and a half years in line, the landscape continues to change.

“People usually think of this as the death of card rails, a traditional high street bank, but I tend to think of it more as evolution. This is a change in the landscape, and it’s no different from any other evolution or change that has taken place in the entire banking industry or any other industry.”

Beardmore called the Gink acquired by payment giant Visa “validation and transfer [open banking] landscape”.

The traditional card issuer Visa, which is constantly trying to break into new sectors, first seized the open banking sector last year when it tried to buy Plaid in a now-shelved deal that fintech would have bought for $ 5.3 billion.

And now we see more and more ministries getting involved in open banking, such as HMRC or the long-awaited Pension Information Center, which is a welcome step towards open funding.

“When you start to see that, for example, ministries accept and approve open bank fees as the primary means of paying the tax, you will find that the hockey stick is growing,” Beardmore said.

“The expectation is unreasonable that open banking seems to be a prerequisite for successful adoption within three or four years, as many other new technologies and new practices take much longer. There are always some sections of society that refuse to play anything new.”

Death of traditional payments

As many people were still hesitant to share their information, Beardmore wanted to reiterate that PSD2 was introduced for the benefit of the consumer.

“It’s such a logical, sensible compelling case that we can see the big picture of an individual’s finances. The target is then the same transition from open banking to open financing to open energy, open telecommunications to the opening of anything else. ”

“If you can show that you can build that secure trust framework, you can work with supervised authorized operators in a way that is secure, reliable and beneficial to consumers with financial information, then you can do it with your gas supply, mobile data, etc.,” he added.

At the end of the day, change is not a bad thing. Consumers want to use fairer and cheaper financial services, and open banking allows them to do so.

“I use contactless all the time and ten years ago, I wouldn’t have used it or it just wouldn’t have been available. No one is hitting your eyelids now. There are more and more use cases and more people mentioning it. “

Beardmore also said that with the introduction of open banking, we can move to open finance: “Those who can recognize and adapt to the revolution are thriving.”

“At OBIE, I think we’ve created a great foundation, but I’m desperate to see it spread to everything else.”

As digital payments increase and move online, it is safe to say that both Beardmore and OBIE want both consumers and businesses to be more open to open banking.