Industry expert Dr Ruth Wandhöfer shares her personal views on developments in the payments space and beyond, from PSD2 challenges with the adoption of APIs to payment system innovations and Central Bank Digital Currencies (CBDCs).

Tell us about some of your current roles

These days I work more in an advisory capacity, including some board roles. Last year I joined Gresham Technologies plc, a software and services firm specialising in data management systems and analytics, or simply put the Rosetta Stone for data. I also joined the board of Digital Identity Net, a small UK fintech that uses Open Banking as a framework to develop a Digital Identity solution, something that has many applications, including reducing fraud in ecommerce, making onboarding more efficient and frictionless and providing more consumer protection and trust for the online world.

I am an advisor to RTGS Global, the world-wide network for cross-border liquidity, helping to design new ways of doing cross border payments that are much more transparent and efficient, which helps both the banks and the regulators.

Since last year I am also involved with the European Third Party Providers Association (ETPPA) trade body in Brussels, advising them in terms of PSD2, the Regulatory Technical Standards (RTS) on strong customer authentication and everything else that is happening in the payments market.

And along with my business partner, I’ve created an advisory business helping fintechs to connect with players such as banks and infrastructures, whether this is for raising capital, gaining new clients or helping to reshape their business models. I am also a partner of Gauss Ventures, an early stage investor in high impact technologies.

I am also currently Chair of the Payment Systems Regulator (PSR) Panel, which has the role of contributing towards the PSR’s strategy and policy and to advise and input on the PSR’s work.

And I’m writing a third book at the moment.

There’s a lot happening in the payments space – what should treasurers be aware of?

PSD2 and Open Banking is an area where more benefits can be realised if we can follow through with the spirit of the law and enable third-party providers (TPPs) to enhance the payment value chain on the basis of functioning APIs and a reduced need to perform secure customer authentication (SCA) where it is not needed.

SEPA Instant is another area where more adoption would certainly benefit the corporate community. After all, SCT Inst accounts for less than 10%. At the same time SCT Inst is critical to increasing the adoption of frictionless payment experiences using Payment Initiation Services.

The European Payments Initiative is another one to call out. This is the latest attempt to establish a European-based solution for debit and credit cards and digital wallets. I have seen several such initiatives in my career, which however were not successful, so let’s see.

From a cross-border payments perspective we have seen much innovation in recent years, such as SWIFT gpi, which has created immense benefits in terms of transparency and speed of execution. The creation of a system that enables Liquidity versus Liquidity is something that I see as a next fundamental step in making international payments safer and more efficient.

We also have the longer-term trend around Central Bank digital currencies, as well as private digital currency initiatives such as Diem. Depending on how these projects evolve and gain adoption, there may be long-term benefits that could be realised around improving cross-border foreign exchange for example.

What is the current state of play in terms of new players in the market?

The financial services sector continues to evolve and adopt new technologies, where new players such as Neobanks have the advantage of creating a very agile tech stack that leverages the most sophisticated solutions. However, we also see that some players that have been very ‘tech’ and not so much ‘fin’ can sometimes struggle in terms of putting the right processes and procedures in place, for example when it comes to compliance with Anti-Money-Laundering and other such laws.

When it comes to PSD2 and Open Banking we are still a long way away from realising the promised benefits. For one, TPPs are having a difficult time continuing to offer the same levels of service since the RTS on SCA came in. We still see – not so much in the UK, but certainly across Europe – that banks have not invested sufficiently in their APIs, and everything is incredibly fragmented as a result. All of this means that neither the objective of increased competition nor the goal of improved services to users can be fulfilled, something that a carefully thought through revision of the EBA RTS would be able to remedy.

What other developments are on your radar right now?

With Brexit and COVID-19, we need to accelerate our efforts to support the SME market. Open Banking and payment system innovations are a key tool for this. Connecting transactional data with accounting information and applying analytics will go a long way to enable SMEs to become more automated, efficient and better at managing their risks and financials as well as gaining better insights into their supply chains.

Another area that needs to see more adoption is AI, in particular AI that supports risk management – Agent Based Modelling (ABM). It is striking to note that ABM is increasingly understood to be an incredible tool that can model different risks using synthetic data that mirrors reality, whilst at the same time the industry is hesitant to adopt it. I wish that banks and infrastructures would take the necessary steps to engage with these types of innovations, which would have been able to predict a number of phenomena that we have experienced in the market, even in recent history.

Lastly – how do you manage to do so much?

For me, the benefit of lockdown has meant having to work remotely. At the same time everything I do is connected, which means that I can be much more efficient in providing valuable advice to the entities I work with.