NORDICS

Michael Salmony 0:12

Hello, my name is Michael Salmony and Javier and Ralf and I would like to welcome you to another episode of the Payments Trilogue. And this time we have Ville from the Nordics. I'm particularly excited to hear from him because I think we can all learn from the Nordics. They are ahead in everything. If memory serves right, they invented central bank money. The Swedish bank was the first to do that.

They did the first CBDC in the world, Avant, I think it was called in Finland. Basically, they invented mobile banking or mobiles with the Nokia. buy now pay later, Klarna. They pioneered eID, e-invoicing. I've always been impressed with the Nordics. If you want to see the future, you need to look there. And Ville is part of that community. He's all over European payments, which he can explain to us in a moment.

And so welcome to you, Ville. Maybe you can tell us a little bit where you come from and then we can dive into some of the fun topics that we've prepared with you.

Ville 1:16

Thank

you for the kind introduction. Good to be here today. And you covered it quite well actually. So I we are I work in the Nordics, I work for Nodea Bank with the transaction banking strategy. And in my free time I'm a complete payment nerd and I also have my own podcast together with my friend Pål Krogdahl. So it's called Fintech Daydreaming and actually quite fun to be on this side of the table every now and then. And finally, of course, disclaimer that I always always have to give is that

The views and opinions that I give now are my own and not necessarily those of Nordea Bank. So I think it was good to get that out of the out of the way before the PR department calls me tomorrow.

Michael Salmony 1:57

Understood. Thank you, Ville. So, we can start. When we met recently, you made some rather unique, controversial, different statements, which I always find refreshing. For example, about the digital euro. You said that banks should leverage the digital euro. Many banks just hate it and don't like it. You actually say there's some advantages to it and the banks should leverage that. Could you explain that a little?

Ville 2:23

Yes, absolutely. And we can connect this actually back to something you mentioned earlier there, which is that the first retail central bank digital currency in the world was introduced in Finland in the nineties. It was called the Avant Cash. And there's a lot of parallels on what happened and what what were the learnings of of that project compared to what's going on with the digital euro and what is per perceived to be the future of the digital euro at the moment as well. We'll come back to that a little bit later. But so

Everybody knows that the Digital Euro is now coming. It now passed the vote in the European Parliament. It has moved on to the trilogue negotiations, and it's becoming a if it wasn't a certainty before, now it is. The design of the digital euro is 95-90% complete. Of course, there's lot of debate on what are going to be the final details of some critical points, including the commercial model. But now that we know as a banking sector,

That the that this is happening, we need to start looking into what are the benefits, what are the kind of silver linings that will come out of the digital euro, provided that it now happens with the scope that is being given. And I like to focus this, the benefit discussion, in three different areas. Number one is the the sovereignty angle. Of course, we will benefit from a more more

A level playing field when it comes to the payment methods in the European Union, especially in the Eurozone in this case, and not being kind of completely controlled by the international card schemes. Like we are, for example, here in Finland. We are completely dependent on international card schemes for payments. We don't even have our own domestic scheme. So the digital euro will now force a European or an alternative to these card schemes. And this can be a good thing.

it be it becomes a a beneficial point for for PSPs and banks because again you now have some leverage and negotiation power because you can always switch back to another option that you didn't have before. The the the further the the points on the political benefits of having a European option of course are there as well, even though they're not as tangible direct business benefits for banks and PSPs.

The second is the universal acceptance. We can talk about the the obstacles of building acceptance networks, of course, in more detail, but in on a high level, it's it's become almost impossible to build universal acceptance for any new payment method because that is incredibly expensive and takes a a lot of investment, and the return on investments is far from certain. this has been tried many times all across the world, and really the only scalable

Acceptance solutions that we see today are based on the international card schemes. The digital euro will use the legal tender mandate to basically force a new method of acceptance. And they have already said that the digital euro acceptance will be opened up for private solutions as well, meaning that the European local solutions and interoperable regional solutions can benefit from the acceptance which is now being built up.

due to the legal tender status of the of the digital euro.

And finally, the because we see the digital euro moving into this acceptance space and the and the and the w the way it solves this kind of instant payment interoperability scheme inside the Eurozone, the banks now need to start looking into okay, how can we actually benefit from this instant infrastructure becoming like a commodity and then moving up the value chain and look at the models of, for example,

What has been done in countries where this has already happened? So we see, for example, in India, we see in Brazil, we have instant payments as a commodity and regulated free commodity in the middle. And that has forced the banks and PSPs to find new propositions and new income streams as well for the consumers and creating better services. So with those three kinds of categories, I think we are

starting to build a case that this actually can be a good thing, especially considering that these investments to actually distribute the visual euro will happen no matter what, now that we we are in a situation that's becoming a legal mandate.

Michael Salmony 6:49

I mean, I love your positive attitude to the digital euro, which is not found often within banks. But one could argue that the first two points, the sovereignty point and the universal acceptance could have been done differently. The regulator could have mandated open banking, for example, that would also have given sovereignty and universal acceptance if they mandated that instead of inventing a new state-driven thing.

And the third one, I'm sorry, that was a bit woolly. Can you make that a bit more concrete of what the benefits for banks could be?

Ville 7:25

The

benefit for banks again, because the basically the the instant payment game is a race towards zero always. The the the movement of money between a b a payee and a payer, especially in retail, is again a very low margin and to be almost zero margin set setup. Now that we're gonna have this regulated infrastructure in place that will take it further close to zero.

The banks will now need to look into the so-called value-added services, whether that's kind of different forms of consumer credit, insurance, pay-later options, better initiation or acceptance protocols, for example, like we've seen in India. there's a lot of innovation that will happen. At the moment, because this we are in this model where we are today.

the everybody's kind of happy just staying put. and now moving forward with these new types of services, of course, is is something that will happen now because again, we're moving the commodity line is kind of moving up. And as far as the point on the on the how the acceptance could have been built, absolutely. But that's the the reality that we have today. And again, we're talking about silver linings more than anything else. And the ECB has been very clear from the beginning that they they want.

bring public money to the to the digital age. And if we take that as something that we cannot prevent, then we have to look at what's the how can we benefit this from in a in a good way. So obviously you can do things in many different ways, but this is the w where we are right now. And I think that's why we're talking about the silver linings instead.

Michael Salmony 9:07

Thank

Javier 9:08

I

I very much agree on the idea of always looking at the bright side of life. And even if you are crucified, just to remind Monty Python, but that means that something went wrong and we are willingly wishing to change a challenge into an opportunity or doing from something bad getting something good. You may be I don't know, you may lose a leg and an arm in a in in a in an accident or whatever and

Still you should fight to monetise your impairment. But that does doesn't mean that you are better off than you were before. And my question to you is don't you think the banking industry has done a lousy job in defending their positions, in

Michael Salmony 9:54

Hmm.

Javier 9:55

not explaining well why we didn't need a a a digital euro, both to the authorities and also to the public in general?

And that the authorities just went ahead without any obstacle, any argument, any intellectual opposition to their willingness to build a Minotaur state. I think a digital euro is another step towards creating a Minotaur state and expanding the the public sector and suffocating the private initiatives. That being said,

Yes, once we have the digital euro, we have to do something with it. But that doesn't mean that it is a good thing.

Ville 10:43

Yeah, no, I mean but we complete I completely agree. So we're looking at the state of affairs as it is right now, and what can we do? What are the things we can control? And these things that we can benefit are things we can control. I think that's good advice for mental happiness in general, is that you know you don't worry about the things you cannot really control because otherwise you're going to be very stressed. Now, on the point, why did the banking sector fail in convincing the European political landscape and the ECB further about the viability of private solutions?

This

was especially when we started in the Market Advisory Group in 2021 The it was one of the questions is that what is the digital euro actually solving that the private sector couldn't solve? And already in '21 the message was quite clear. The I'm still not able to send money from one Euro country to another Euro country without know knowing the IBAN number of the of the recipient.

So I need to know which bank, I need to know the the the bank bank account number. There's no aliasing system. I cannot do that instantly unless we use the same solution. So of course if I'm a Revolut customer, I'm a Wise customer, then I can just use the alias of of that particular solution. But there is no interoperability in place, not in scale. And this was number one.

The number two was again acceptance and especially interoperability on the acceptance. So if I if I take a Finnish Siirto wallet, which is a wallet that we have here in Finland, I cannot go to Spain and pay at the Bizum point of sale in any shape or form because they just don't work together.

Then it became a debate about okay, so if the private sector then says that okay, we will solve all these problems. So coming up with an approach that is a credible approach to are we able to do this in time and scale, that the ECB would like to see and the European Parliament would like to see. And there was a very significant effort to do this. It was actually submitted to the conversation quite clearly that this is the roadmap that we that as a bank believe we could believe in, but ultimately there was no trust.

In to be able to deliver that. And I think the one of the reasons, and again, this is just a personal opinion, is that ultimately, as I kind of talked about in the beginning as well, is that there is no business case for interoperability, not in the short term. And these kind of misaligned business incentives for banks and private institutions to work on these kind of complicated industry-wide initiatives like interoperability.

Because they're so misaligned with these financial incentives, the it becomes difficult to execute, it becomes difficult to justify these long term investments to work together with competitors, no more or less. And and even though of course we all know here that these are good things that need to be done and there's a long term clear benefit there, this kind of a short term thinking in many ways prevents this from happening in scale.

It can happen regionally. I mean, we've done, for example, here in the Nordics, we have been successfully working on Nordic infrastructure many times. And we've been doing that quite successfully, es, especially with a few occasions. But even here in the Nordics, it's sometimes difficult, let alone in a larger area like Europe. And let let's not even go to global a global scale here. So I think this the private sector kind of fundamental misalignment on the business incentives.

is big big kind of preventer of this interoperability. but again, something that of course could could be solved in the long term.

Ralf Ohlhausen 14:17

Could could I ask on that maybe the learning from that first CBDC in the world called Avant you mentioned is there anything that the ECB or the rest of Europe can learn from that failure? That was my actually my first question. And the second one is to do with the fact that okay, well that was Finland, but the

Most of the Nordics is not in the Eurozone. So how could or should the digital euro create interoperability and sovereignty for the Nordics? Because it doesn't. You're just sorry, you're not in the club.

Michael Salmony 15:03

Thank

Ville 15:05

That is true. let me take the second question first and then I'll c come back to the Avant cash because that's a fun, longer story. so first of all, the we know that for example in Sweden the e-krona project was happened already before the ECB started publicly talking about the digital euro. So the central retail central bank digital currencies were already in the works here in the Nordics, especially in Sweden a long time ago. but now the

The Riksbanken has said that they have put the e-krona project in on pause. The reason being that they're now also monitoring what the ECB is going to do with the digital euro. And in expectation, even though they are not saying this publicly, that they will align with the ECB's digital euro architecture, should that become viable for other Nordic countries, including Sweden, in the future. The other Nordic central banks have said similar things.

of course, Denmark being the most conservative, I would say, at this point in time when it comes to any kind of central bank digital currency in retail. But the reason why that's a credible theory, at least, is that the already the back-end infrastructure, including the TIPS and Target2, is being adopted in all the Nordic countries as a central bank infrastructure for settlement. We're even gonna have cross-currency settlements soon, we think, in between the Nordic countries on central bank level.

so it's just a logical step forward should they want to move into retail central bank digital currency that they would adopt a version of the digital euro as a kind of a multi-currency setup in the Nordics as well. Again, very much speculation at this point, but that's the kind of logical trajectory that we think might happen here in the Nordics for the central bank digital currencies. The

First question on the Avant Cash. So again, a fantastic project. And I I I do know that the ECB has been reading these case studies as well from from Finland from the nineties quite extensively. So they they do know what happened and why things happened. So I I don't think that they we need to try to make them rethink their positions based on that. But just to kind of recap, the in the 90s, the Finnish central bank decided that

They needed to build a card-based solution for payments in Finland. Already then we had Magstripe based bank cards, or we would call them debit cards today. Back then they were called bank cards available, not being used as much, pretty much cash based. But the Finnish central bank thought that they would they need to bring a digital version of cash on a card based system.

How they did that? They did that based on a chip-based charge card, as was the very common actually in the 90s. The difference here was that it was actually central back money on those chip cards. The way it worked is that you went to an ATM, you entered your ATM card, your regular ATM card, and then there's another slot built for a chip card. You put your Avant Cash chip card into that, and then you loaded the money from your bank account into that Avant card using the ATM.

After that, you were able to use your avant card completely offline. So again, it was just a chip-based payment at the point of sale. And you were able to use your prepaid balance as central bank money at the point of sale. This was well, a very long expensive rollout, as we're now expecting for the digital euro as well. Back then there were no chip readers available at merchants, there were no chip readers at the ATMs, none of this was available.

So a lot of the my money, initial money was spent on this chip-based infrastructure to be rolled out. And then finally, once they got it got it rolled out, people didn't actually use it as much. The reason was that nobody wanted, or one of the biggest reasons was that nobody wanted yet another account. So people felt why should I spend the effort to actually load money to another balance that I can only spend in certain circumstances.

And if by the way, if I lose the card, I also lose the money because again it was completely offline legal tender status money that you had on the card. So because of this, nobody really found a reason to use it. The the final pivot that they did is that the Central Bank of Finland decided that they will sell it to the private sector, which then adopted this adopted it, and then ultimately the kind of silver silver lining and the kind of outcome of this

a perceived failure of a cash was that suddenly we had a chip-based payment infrastructure i available in finland. Now of course later on that was pivoted into EMV-based chip payments and again it was the kind of the first step towards that next thing ultimately and that's what that's the kind of the parallel that I believe will also happen to a certain extent.

at least with the ECB digital euro as well. We're gonna get a lot of these things that we otherwise would not have built, at least not as fast, based on this, and then we'll see where the next steps will take us. And I do believe the key piece will be the acceptance piece, which again will break the duopoly that we have today with international card schemes.

Michael Salmony 20:34

I mean, that was a lovely historical lesson of the first iterations and some things have changed, of course, the technology, have chip cards and readers and everything now and lots of learnings. But I think the fundamental points that you made initially is really important. Let's stop whinging that we lost the battle to prevent the digital euro and let's make the best out of it. I think that is really the right approach.

If I'd been emperor of Europe, I would have mandated iDEAL everywhere or open banking everywhere. I wouldn't have gone for the digital euro, but that has happened and let's make the best out of it. So I think that's a very sensible attitude and maybe that's how we should all start thinking about this topic. I still have to understand what these value added services for the banks are going to be, but that's another topic. But you have many more strings to your bow. We've talked about the digital euro. You also...

got some original thoughts about blockchain, which you somehow think isn't quite as distributed as many people think. Maybe you could share your thoughts on

Ville 21:36

Sure. So a bit of background before I kind of go down the rabbit hole of blockchain. So the so I've been working in crypto with cryptocurrencies and blockchains since 2013. So that's thirteen years now. So that's that's a lifetime in the crypto age. I started off by looking into Bitcoin as a we vehicle of remittance between emerging markets and and the kind of Western economies, and then

Then pivoted on to join actually Nordea in 2017 as the head of DLT and blockchain. So I worked with five years with different kinds of projects with Nordea using DLT and blockchain. And then kind of grew our understanding on those topics and actually launched two different systems into production using blockchain technology. Later on, we've been looking into things like public blockchain stablecoins, tokenized deposits, of course.

And other forms of digital currencies, but we're doing we've been doing less experimentation with blockchain now lately because of these lessons that we learned between '17 and '22 when we did a lot of a lot of experiments. So, again, all that to say that we've we've seen a lot,

Javier 22:43

Yeah.

Ville 22:44

we've tried a lot. Nordea Bank it itself has done dozens and dozens of different prototypes and experimentations, so it's not it's not that we haven't tried.

And based on this, it's a couple of maybe interesting observations that at least I can, from my personal perspective, share here. And the the first one is that the blockchain, especially in enterprise context, and to a certain extent also on the public blockchain context, is is not decentralized. it is just another intermediary. The only question is that how is that intermediary configured?

And in many cases, especially in the enterprise cases, they turn out to be very centralized methods of exchanging information between the parties who are part of the network. And that kind of defeats the purpose of the enterprise blockchain case altogether. I'll go to a little bit more detail on that soon. The second one is that public blockchains also perceived to be decentralized, especially in case of Bitcoin.

more often than not are not. So again, I won't go into the Bitcoin debate, even that's in my opinion fairly centralized. But especially the the so-called programmable blockchains that are popping up everywhere now, they tell they're typically controlled by private companies or for-profit institutions, and then again with a handful of people really controlling what's going on in the platform development side of those blockchains. And this is the number one kind of

fallacy that I always want to talk about, and especially when we talk about in context of banks, we need to really understand what what are we talking about when we're talking about these quote unquote blockchains and what are the definitions of those that we just cannot wave our hands and say, well it's decentralized so we have to don't have to care about it. We absolutely have to care about it.

Michael Salmony 24:32

If I understand your argument right, mean, obviously the algorithm itself is distributed. That's the whole point, right? Distributed consensus. But the governance is actually very centralized. This whole ecosystem is controlled by very, very few players. Is that roughly

Ville 24:46

Correct.

Michael Salmony 24:46

right?

Ville 24:47

Correct. So again, and even with the algorithms, the the you have to remember that there is the it's all always been developed by someone, some entity, somebody makes a decision of the of design and then finally roll out an adoption. And typically if you look at the value chain of updates to blockchains, for example, they're controlled by a very few indiv even individuals, and then b it becomes an adopted way of working in in that network quite quickly.

decided by only a few actors typically. So that's that kind of a the fallacy of that there's complete democracy in these blockchains is not true. And typically it's like a foundation or some kind of for-profit company that really makes the decision on on how to update something on the on the blockchain itself.

And if you are a bank working in this in this blockchain, then you are basically at the mercy of of these centralized entities who are kind of making those technical decisions for you, including with the arg algorithm and the consensus. Even that can be changed. So it's it's just code ultimately we have to remember.

Michael Salmony 25:51

And I think you had a concrete experience in the Nordics in the real estate area. Maybe you can share that.

Ville 25:58

Yes, of course. So again the the previous comments were mostly about the public blockchains, but now we're moving to the space of the enterprise blockchain and using so-called distributed ledger technology, also known as blockchain technology in some cases, as the kind of central architecture to connect the entities who are connecting to the network. And the concrete example here is that we started a project in 2018 in Finland.

called which ultimately became called DIAS. And this is a housing transaction network in in Finland, which originally and still does solve the problem of making a real estate or a housing trade in Finland with a completely digital way. Before 2018 or actually 2019, the only way you can actually buy a house or an apartment.

In Finland, we said we have to set up a physical agre meeting with the buy with the buyer and the seller. and you have to be in a bank to sign the documents and handle the kind of deposits and everything related to the handling of money. Now, DIAS saw this problem and said, okay, we need to make a digital version of this. And the decision back, especially back in 2018, because everybody remembers it was the time when DLT Hype was really kind of hitting its peak.

especially in in banks. And they we came up with the idea that okay, why don't we build a distributed network for these housing transactions? So all the banks joined, the the real estate registry joined the tax authority would be one, and then we had the real estate brokers as one. And then it would be done with this distributed consensus the deal would be go end to end in a digital way. And this is actually long story short exactly what we did. And

The system went into production using distributed ledger technology on one of the common platforms that were very common back then. And it went into production and quite quickly became very, very popular. So today, and I don't have the latest statistics in front of me, but I think it's believed between 70 or 80 percent of the whole Finnish housing market is being traded on the DIAS platform even today. So if you just look at those numbers, it's one of the, if not the most successful.

DLT projects, especially driven by banks, that has ever been done. So again, fantastic success. Now here's where it gets interesting. So the once it became very popular, the system basically became very strained, and there was a lot of need for a new type of development to happen on the on the platform or the network. And because we were using DLT, this became a bit of a problem because the

First of all, developing solutions or upgrading the platform was extremely complicated. You had multiple nodes, you had a very proprietary language where it was being developed on, and finding people to how or know knowing how to do that became very difficult. Also, the performance was completely, well, not great, because the again doing a distributed consensus on every transaction, of course, is very slow, and the scaling that up.

Became very expensive. Then the the consensus in the DIAS between the DIAS owners and banks was that well, do we actually really care about the DLT component of this? And then quite quickly the answer was that no. Because the again, you have a centralized governing entity where the rules between the parties and the processes between the parties have already been set. ultimately, the banks and the users of the platform.

Only log in to a page, and then that process is completely behind the scenes. You don't have your own keys or anything like that. It's completely used with your bank identity. And again, because of this existence of these rules and trust between the entities in that network, it became clear that it would be much more cheaper to do this in a centralized database, which is exactly what happened. The costs of running the system went down drastically, the performance went up.

and again the talent pool for developing the platform further, and therefore the speed of development of the roadmap also went completely much more efficient levels. So, again, long story short, the DLT element was maybe necessary in the beginning because I genuinely believe that because we used DLT in the beginning, it became almost like a permission for banks to work together. back then, even back then it was difficult to get the banks to the same room to agree on anything.

But now that we have this DLT magic word, we could s use it became a possibility for us to work together to build something like this. And I genuinely believe that was valuable back then. But then in the long run, it became completely unnecessary. And I yeah.

Javier 30:54

But Ville sorry

Ville, what you are saying is that the blockchain suffers of the symptoms like any other standard network effects, switching costs, dependencies, and once you are locked in, you are even worse than with any other alternative. So it is even more acute in the blockchain rather than any in a centralized system.

Ville 31:18

Absolutely, because again it's it's so much more complicated to do anything. And that's why it's sometimes quite frustrating for me as well, because many times many of these new networks that are being d developed be and they they choose DLT on the merits of that it's somehow the technically superior, it has so called programmable flows and conditional this and that and atomic settlement, while forgetting that all of that can be done.

In a completely conventional cloud-based database stack. The only question

Michael Salmony 31:45

Yes.

Ville 31:46

that you're really solving solving there is that how do how do the parties participating in that network agree on rules and responsibilities together? If you can do that without the kind of blockchain element, then your golden to just do something more simple and scalable. But and I even if you don't, the blockchain actually doesn't solve those questions. So you still need to solve the same questions. So sometimes it's a little bit kind of circular.

thinking

that we see in this basic at least in my opinion.

Ralf Ohlhausen 32:15

That's nice. you're basically confirming what we recently had in an episode like debunking all these blockchain myths. thanks. I have though a question or my next question is about open banking in the Nordics because you were there, you had many much of that well before PSD2.

similar to like Germany, Austria as well. So you're were in the lead. And I guess it also shows that some of the best there have been snapped up by American card schemes now with Tink and Aiia. and I think even at Nordea, I think you had an API market. So you're pretty strong in this whole business all way long.

Where do you see this going on? How do you see the future of open banking in the in the Nordics? Is it becoming a a a real an important element or not so much?

Ville 33:21

It's part of the canvas that we have here and a important part as well. I I want to actually find some interesting parallels to everything that's been discussed discussing here with regards to open banking as well. Remember when PSD2 came along and all the banks were kicking and screaming that no, we don't want to do this, it's horrible. And why would we open up our APIs and all these services? And they had to do it. It was mandated. Again, echoing what is happening now with the digital euro.

It is the banks are basically saying that's the most horrible thing, and it but very well might be, but we need to make the best out of it. That's exactly what we did in the Nordics. So Nordea was, like you mentioned, one of the first banks to adopt this thinking that no, we're gonna embrace this. This is going to be a thing that we work together with our customers to make something with the APIs. And yes, we're gonna do the compliance bits, but we're also gonna go beyond and develop, Michael, to your point, these value-added services.

that actually we can monetize on beyond the regulatory minimum compliance. And those became like the we have premium APIs, and again we're seeing a lot of value for especially corporate customer space space using premium APIs. And we see the same trajectory happening even with the retail digital euro now. So again there's going to be a lot of while the segment is not going to be corporate for the digital euro, we still still see the trajectory of new types of services coming forward beyond the mandatory regulatory compliance.

The so the this understanding that APIs are gonna happen was very important for us to choose our strategy. And now we're really working on moving beyond open banking into what we call embedded finance or embedded banking, where the especially now with the future of agentic AI flows, we need to find a way how how do the agents work with our banking services and that becomes part of our open banking journey as well.

Final point on that. The one of the reasons why the Nordics was able to move forward quickly with the open banking and especially beyond PSD2 is because we had and still have a very strong digital digital identity or eID infrastructure in the Nordics. In many countries where you just have the API but you don't have a eID infrastructure, that initiation becomes more complicated because there's no standardization on that level.

But we already had that in the Nordics in different shapes and forms in different countries, but still, and that became a critical element in its success. Now, to conclude on this point, the now that we see the EU digital identity space happening, so we're finding a new way, a new next generation way to digitize people's identities and use use this kind of a verified credential approach, even for corporates on that space. We're gonna see a next leap now in the

open banking space as well and looking forward to that.

Ralf Ohlhausen 36:16

Yeah, well it

if I could dig into that because I I think it definitely is one of the big success stories also for self-regulation, that you had all these bank IDs in in the Nordics there or that you just did it with no regulator ever asking for it, really.

But then there is also I think well that one case where then one like Vipps wants to access the Swedish bank ID and then discussions around that. Is there room for more cooperation between these various bank IDs in different countries, or will this all now be resolved as part of the EUDI wallet thing coming up?

Ville 37:02

There's always space for more collaboration, but it's again it's very slow and finding the incentives is difficult. but and then now again, this kind of public sector interven interference here coming with the through the EUDI, that's again it's going to become table stakes. So then we have to we once we can establish that we will have this interoperable identity infrastructure, we can move on to other things as well.

it's actually one one interesting point to make here is that there's a there's a very common belief that especially here in the Nordics where their digital identity is being provided mostly by banks, that this would be some kind of a fantastic money-making business for the banks. Quite the contrary. The if there is a way that we can find a way to do this cost efficiently outside, I think that would happen for every bank. it's not a profit making

opportunity or anything like that for the banks. But the the re the reasons are actually cost related from a perspective that because we have to ensure the identity and we have to assume the liability of identifying the customer, the only way you can do that in a legally sustainable way is to do it by yourself. And that's why we kind of assume that responsibility and seeing how can we then also make it usable outside.

But if there would be a legal and very clearly liability defined way to do it outside, it would definitely happen. And I think the EUDI is heading towards that direction, even though there's a lot of unanswered questions, especially on the liability side there as well.

Michael Salmony 38:39

Fantastic. I think we've covered a lot of ground with you, Ville, so unless anybody has any last...

Ralf Ohlhausen 38:45

I I do, I do, because I think

we we we sorry we we can't talk about the Nordics without talking about P27. And sorry for that.

Michael Salmony 38:57

Hello.

Ralf Ohlhausen 38:58

I think I have to put my finger into that. So I think it was one of the most ambitious projects that Europe has ever attempted and and run by well the most collaborative banks and advanced banks in Europe and all that and then it still collapsed after

failed

license applications and I think the reported basically was it seven hundred million euros spent and now now you are actually or with Vipps as I mean it's maybe related I if is it's if it is related but now as a as a follow-on to that it it's more about collaboration between like EPI Wero and

And Vipps, but also the other ones like Bizum, etc. So this Wero EuroPA alliance which is looming. So well why or why do you think this will work out better than the P27? Or what went wrong there and what or what can EPI and Wero learn from or your new EuroPA alliance there learn from all that?

Ville 40:06

Well, there's difficult to say what they can learn from P27. I mean there's there's a lot of factors that went into the failure of P P27. number one being that it's for going back to my original point, so it's very difficult to find shared financial incentives, or this kind of a collaborative space between competitors. And that's why the old joke was that if you put two banks in the in the room, they will not be able to agree on the color of the wall.

because again it's very difficult to agree on anything between banks, let alone if you're talking about multiple banks, like in case of P27. But that's that's one of the problems. And again, because being being competitors and then trying to find a collaborative space that would be also in line with the antitrust regulations of the European Union and all the national all the nationalities are represented in those consortiums, it becomes

Extremely slow and difficult to work together. And then you start start to see different kinds of symptoms of that. And then ultimately many things fall apart. Not only P27. There's a very, very, very long list of different kinds of collaborations in Europe and otherwise that have failed for similar kinds of teams. They are not the same, but they rhyme many times.

So the so what can we see with P27 failed, then what can Europea do to get? Well, I think it's actually changing circumstances. I'm still coming back to my point about the digital euro. Now the digital euro is taking the acceptance off the table, basically saying that it's solved. so now now the EuroPA can focus on connecting national and regional solutions together and then finding this

way to replicate what the digital euro is doing between the private sector solutions. So they need to lift up the game and make understanding that this is a commodity table stakes thing to work together. And that's why European now is in completely different space from an incentive perspective. So I think that's that's the critical piece. When it comes to execution, there's different ways on how to execute on the interoperability, many of that have been discussed even in this podcast before, so no need to replicate those, but I think

those questions will will settle now that the digital euro is kind of looming in the horizon.

Javier 42:19

But Ville I admire in any case the bravery in recognising a failure and not sticking stubbornly to the idea and throwing money out good money after bad money and and stopping the the the what was a a problem. I that's precisely what I see with digital euro. We are piling billions of euros in a mountain that will give birth to a mouse.

But we'll see.

Michael Salmony 42:54

On that happy note. So any more urgent questions? I I love the point about the P27 and the Wero and the EuroPA, but I think in the interest of our listeners, maybe we should gradually draw to a close. So I thought that was a fantastic episode. Thank you so much, Ville, for being so punchy and having some very new ideas. mean, digital euro that we should...

just accept it's happening and make the best of it. On blockchain that it's been super to actually get new business models going, get banks working together, thinking about new things, but maybe then for the operational for scaling it and for making it happen, maybe you need to go back to sort of other systems. We've talked about what the learning is from P27, the eID, open banking. I think we've covered a lot of things and I've certainly learned a lot of things.

and I hope everybody who's listening to this enjoyed it as much as we did. So thank you very much, Ville, and Javier and Ralf. Javier, you sound like you want to say something.

Javier 44:00

Yeah.

Ralf Ohlhausen 44:01

Thank you.

Javier 44:01

Yes just to thank Ville for this very, very truly engaging chat. It it has triggered in me many many further ideas. So thank you very much Ville.

Ville 44:13

It was my pleasure.

Ralf Ohlhausen 44:13

Indeed, thank

you.

Michael Salmony 44:15

Thank you. That's the point that we all learn because none of us have the answers to everything and that we all get smarter by talking to each other. Okay, thank you to all here and thanks to all watching and see you next time.