What is the point of a non-confidential reference letter?
From the perspective of UK higher education, the 'point' of a non-confidential reference letter is that there is no such thing as a confidential one; any data held on that student (such as references) can be disclosed by the institution holding it.

How does the old saying go? Dance like no-one's watching, writing an email like it's being read aloud in a deposition.

References are a tricky grey area, and I do preach caution in case a student ends up seeing what you have written - which can be embarrassing, or even libelous if you can't prove statements that purport to be truth.

I do not think that this undermines the referencing process, however; if you can make true statements about a candidate, including your opinions about them, then, in my opinion, you are within your right to do so.  After all, your student has asked you to do this.