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Ville Sointu.vtt

English

{{00:00:03}}
Interview with Ville Sointu: Hi, I'm David
Penn, Research Analyst with Finovate.

{{00:00:06}}
Joining me now is Ville Sointu.

{{00:00:07}}
He is the Chief Strategist for
Digital Currencies for Nordea.

{{00:00:10}}
Great to have you with us.

{{00:00:11}}
Good to be here.

{{00:00:12}}
Yes I wanted to start off with
a little bit of a looking back.

{{00:00:14}}
Last year you were with us and you
were talking about embedded payments.

{{00:00:17}}
That was the hot topic.

{{00:00:18}}
Yeah.

{{00:00:18}}
I'm curious, a year later, would
you say that embedded payments have

{{00:00:21}}
taken off in Europe or we're still
waiting for them to clearly wrap?

{{00:00:23}}
I think we can say just as consumers
or even if you look at the numbers,

{{00:00:27}}
yes, definitely it has become a thing.

{{00:00:29}}
And yeah, it's, it was, obviously
the topic in Finovate, again, one of

{{00:00:33}}
my favorite conferences of the year.

{{00:00:34}}
So I'm again here one year later, but
yeah, embedded payments was all the rage.

{{00:00:40}}
And, for a good reason, it is
really the kind of the first easy

{{00:00:43}}
to understand a case or a use case
for, embedded financial services.

{{00:00:48}}
So I can, maybe we can say that.

{{00:00:50}}
Instead of just talking about
embedded payments this year,

{{00:00:52}}
it's more about embedded finance.

{{00:00:54}}
It's a broader portfolio of services that
are being embedded into the user flow.

{{00:00:58}}
So far of everyday services that we use.

{{00:01:00}}
So instead of just being able to pay
at the end of something or as a part of

{{00:01:04}}
something, now you have financing options,
you have insurance, you have even for car

{{00:01:08}}
purchases, you have things like leasing
or you're able to get different kinds of

{{00:01:12}}
credit lines established by now pay later.

{{00:01:14}}
So again there's a large
array of things happening.

{{00:01:17}}
And if you look at what this through the
lens of either simple thing like card

{{00:01:21}}
tokenization numbers or digital wallet
usage, or that kind of BNPL growth, all

{{00:01:27}}
of them are just showing major growth.

{{00:01:29}}
So I can say that maybe one year
later, maybe we were onto something.

{{00:01:33}}
Very good.

{{00:01:34}}
It's really interesting.

{{00:01:34}}
I was speaking with some folks
about generative AI and how

{{00:01:37}}
it had such a rapid adoption.

{{00:01:38}}
But when you think about it, embedded
payments was something else that

{{00:01:41}}
people as soon as they had access to
it, they really seem to get into it.

{{00:01:43}}
You mentioned some of
the different use cases.

{{00:01:44}}
It also had a pretty strong
trajectory out of the gate, it seems.

{{00:01:47}}
Oh, yeah, absolutely.

{{00:01:48}}
I think it really was service
like Uber, for example, that had

{{00:01:52}}
fully embedded payment experience.

{{00:01:53}}
Nobody thought that actually that makes
a big difference, but ultimately anybody

{{00:01:57}}
who's been using these ride hailing
services understands that is really

{{00:02:00}}
big part of the attraction is that
it's just part of you open the door,

{{00:02:04}}
you get in the car, you get out, you
don't have to worry about the payment.

{{00:02:08}}
It will just happen in the background.

{{00:02:10}}
It's  almost like a prototype
experience of an embedded payment.

{{00:02:15}}
And now people want more.

{{00:02:16}}
So it's again, embedded finance, things
like credit and things like this.

{{00:02:21}}
Yeah.

{{00:02:21}}
So it's really a very,
exciting development.

{{00:02:23}}
You just think about how it's almost been
a revolution in anti friction where people

{{00:02:26}}
are really starting to realize, wait a
minute, there's all of this middleman,

{{00:02:29}}
all these other steps that are not gone.

{{00:02:31}}
And what an experience I have now
and how it almost feels unearthly.

{{00:02:35}}
You're just getting in and getting out
and just moving on through your day.

{{00:02:37}}
It's something else.

{{00:02:38}}
And of course, there's the flip side
of that, which is that when things

{{00:02:40}}
become too easy, then the fraud, things
like this become a problem as well.

{{00:02:44}}
So that's another thing that we're
observing right now is that how do we

{{00:02:48}}
actually maintain control yet maintain
the simplicity in the payment experience?

{{00:02:52}}
This, of course, is some somewhat
constrained actually quite a bit

{{00:02:55}}
constrained by the by the regulations.

{{00:02:57}}
So of course there's PSD two upcoming PSD
three, the payment service regulation,

{{00:03:01}}
all of these things that are, defining
the user experience, especially when

{{00:03:05}}
it comes to things like strong customer
authentication, SCA, which is a big

{{00:03:09}}
topic for, for instance, account
to account open banking payments.

{{00:03:14}}
We mentioned 808 payments.

{{00:03:15}}
I'm curious about some of the other
developments in payments that are either

{{00:03:18}}
a part of embedded finance or sort of
rolling alongside embedded finance.

{{00:03:21}}
What are some of the other payment
trends that you're finding out

{{00:03:23}}
that are interesting to you?

{{00:03:24}}
So the as my title implies, we're quite
interested in the digital currency space.

{{00:03:30}}
And there's two reasons for that.

{{00:03:32}}
So basically we all know about the central
bank digital currencies, which we're going

{{00:03:35}}
to talk about a little bit later, I think.

{{00:03:38}}
But the other side of this
conversation is the private side.

{{00:03:41}}
Some people actually say that the
central banks had to react to the

{{00:03:44}}
private sector releasing their own stable
coins, especially in corporate payments.

{{00:03:49}}
So there has to be some kind of a
public option for this tokenized private

{{00:03:53}}
versions  of of money and currencies.

{{00:03:56}}
And yeah, that's definitely
one of the things.

{{00:03:58}}
So what is happening on the private
side for digital currencies?

{{00:04:01}}
And then of course the public side
again, represented by this central

{{00:04:04}}
banks as of today, other than that I
guess you cannot be in an interview

{{00:04:10}}
in a fintech conference without saying
generative AI a couple of times more.

{{00:04:15}}
So, yes, of course AI for fraud
prevention, AI for for basically

{{00:04:20}}
making the infrastructure more
automated, more secure, more aware

{{00:04:24}}
of what's going on, preventing fraud.

{{00:04:26}}
That's the that's the major
usage of AI for us for now.

{{00:04:32}}
Then, of course, the third trend
to maybe mention is sustainability.

{{00:04:36}}
So again, sustainable operations,
especially from the payment side I'm

{{00:04:41}}
part of transaction banking myself.

{{00:04:43}}
Of course, we're looking into the payments
infrastructure and payment operations.

{{00:04:46}}
We want to make make sure that the
sustainability values are being reflected.

{{00:04:50}}
The very concrete example
of how we do that is that we

{{00:04:54}}
demand a lot from our suppliers.

{{00:04:56}}
So for all of you suppliers, or one
of you suppliers, for those who are

{{00:04:59}}
listening out there,  it's definitely
something you need to consider as well.

{{00:05:03}}
There is a very clear guidelines on
what you can do as a supplier for Nordea

{{00:05:08}}
if you want to be there in terms of
the sustainability angle, at least.

{{00:05:12}}
It's really interesting.

{{00:05:12}}
We've had a couple of presentations
here at Finovate already where

{{00:05:15}}
folks are talking about the issue of
sustainability in the supply chain

{{00:05:18}}
that just not the original company,
but look, your connections your

{{00:05:21}}
partners, your customers and so forth.

{{00:05:22}}
So it's interesting here at Nordea
is very much on top of that.

{{00:05:25}}
Oh, yes.

{{00:05:26}}
And of course, the sustainability agenda
is much broader for Nordea as well.

{{00:05:29}}
So there's sustainable financing,
there's the kind of again,  the the

{{00:05:33}}
way we position ourselves in the
society and how we interact with the

{{00:05:38}}
with the programs that are helping
sustainable values to be real.

{{00:05:42}}
But this answer more from a payments
operations perspectives is we're

{{00:05:46}}
talking about payments today.

{{00:05:48}}
Sure, Now, again, we've
been talking about Nordea.

{{00:05:50}}
You're a relatively
newcomer to the company.

{{00:05:51}}
You've been there for how long?

{{00:05:52}}
Yes.

{{00:05:52}}
So this time around, I've
been there for two weeks.

{{00:05:55}}
Yeah.

{{00:05:56}}
And when I say this time
around, I actually did work

{{00:05:58}}
for Nordea five years before.

{{00:06:00}}
So I stepped out for a year and a half.

{{00:06:04}}
I got the opportunity to go back and
I'm happily back now for two weeks.

{{00:06:07}}
Yeah, that's interesting.

{{00:06:08}}
Can I ask what brought you back?

{{00:06:10}}
It was really the the opportunity to work
with Central Bank Digital Currencies.

{{00:06:14}}
I was part of the European
Central Bank's Market Advisory

{{00:06:17}}
Group for the digital euro.

{{00:06:18}}
The ECB set up an advisory group for a
two year period, as a sounding board for

{{00:06:25}}
the design process of the Digital Euro,
and being part of that got me interested,

{{00:06:31}}
almost like excited about the project.

{{00:06:33}}
So the opportunity to work on the
private side in a bank working on the

{{00:06:37}}
strategy  for CBDCs and the digital euro
specifically is very intriguing to me.

{{00:06:42}}
And I find it as a very interesting
opportunity for me professionally as well.

{{00:06:47}}
Yeah.

{{00:06:47}}
I know a lot of folks, I'm sure, who
are listening have heard quite a bit

{{00:06:49}}
about central bank digital currencies,
at least in general, and this what's

{{00:06:53}}
happening with the sand dollar and the
Bahamas, the ideas of things happening

{{00:06:56}}
in China and so forth, as you look at it
from that 300, 000 or 30, 000 foot view,

{{00:07:00}}
how do you see the landscape right now?

{{00:07:01}}
What is going on that you find
most interesting in the field?

{{00:07:03}}
So I think the the narrative has changed
over the past year from Will this

{{00:07:08}}
happen into more yes, it will happen
in, it's almost like inevitably that

{{00:07:12}}
will happen in one way or another.

{{00:07:14}}
Now,   people are starting to
understand that there is no one way

{{00:07:20}}
to do central bank digital currencies.

{{00:07:22}}
There is no one right way
as far as we see right now.

{{00:07:25}}
So what the central banks are doing
is that they're doing a very careful

{{00:07:28}}
work, especially the ECB is doing
careful work on seeing what does

{{00:07:32}}
the digital euro actually look like?

{{00:07:34}}
And how do we actually come up with the
design decisions that got that correspond

{{00:07:38}}
with the values that they have stated
that will that the digital euro will

{{00:07:42}}
will have to deliver, for example.

{{00:07:44}}
So again, two things where we're
coming to terms in terms of what

{{00:07:48}}
it actually is from a technical
perspective, but we're also coming to

{{00:07:51}}
the realization that this will happen.

{{00:07:53}}
So I think between these two things,
it's a very interesting time to be

{{00:07:56}}
a part of that, because again a lot
of things might still change in the

{{00:08:00}}
way they're going to be implemented.

{{00:08:01}}
And so you're fairly confident in
terms of, again, we hear about a lot

{{00:08:04}}
of things happening in a lot of parts
of the world, some more advanced or

{{00:08:07}}
further down the line than others.

{{00:08:08}}
I know, for example, in the
States, not very far down the

{{00:08:10}}
line compared to, to, to Europe.

{{00:08:12}}
But you're fairly confident about
what's happening, at least in the

{{00:08:14}}
European scene, in terms of, these.

{{00:08:16}}
Correct.

{{00:08:17}}
Yes.

{{00:08:17}}
Again, the there's many
projects, even in the Nordic.

{{00:08:20}}
So again, Nordea being the largest
bank in the Nordic countries.

{{00:08:23}}
That's what we're looking at.

{{00:08:24}}
So there's been Sweden has been
the front runner  for quite

{{00:08:29}}
many years in the CBDC world.

{{00:08:30}}
So they had their e-krona project.

{{00:08:32}}
They still have it.

{{00:08:34}}
They did put it on a bit of a pause.

{{00:08:35}}
So they concluded the pilot phase now.

{{00:08:37}}
So they said that we, have
learned what we need to learn.

{{00:08:41}}
And from what I've been observing, it
seems like they want to see what will

{{00:08:45}}
happen with the digital Euro and the ECB,
and then they will see how to proceed

{{00:08:48}}
with the e-krona project after that.

{{00:08:50}}
Again, this is my personal
interpretation, not an official statement.

{{00:08:55}}
Then we have similar activities happening
in other Nordic central banks as well.

{{00:08:59}}
So you have to remember that Finland
is the only Nordic euro country.

{{00:09:02}}
So again the Nordic headquarters
being in Finland, I'm there as well.

{{00:09:07}}
The the euro is the first
one out of the gate.

{{00:09:09}}
It would seem from the Nordic countries.

{{00:09:12}}
Yeah it's really interesting.

{{00:09:13}}
I'm curious for those who
are we'll put it this way.

{{00:09:16}}
Skeptical or don't really
see the use for it.

{{00:09:18}}
Can you explain to those folks
what their Fundamental use case for

{{00:09:22}}
these is why this is such a thing.

{{00:09:23}}
You think that it ultimately is going
to be like you said, inevitable.

{{00:09:25}}
Yeah.

{{00:09:26}}
When you find the answer
to that, tell me as well.

{{00:09:30}}
Because again, if you look at what the
digital euro actually brings, it brings

{{00:09:34}}
you it's going to be one in one form or
another, a new account for you, which is

{{00:09:39}}
going to be serviced by intermediaries, i.

{{00:09:42}}
e.

{{00:09:42}}
your current banks, your
current payment institutions.

{{00:09:45}}
So you're not going to have
a direct relationship with

{{00:09:47}}
the European Central Bank.

{{00:09:48}}
So the customer service will be handled
by existing players in the market.

{{00:09:52}}
Then it will ultimately be an app
or a card or digital forms of money

{{00:09:58}}
that you can spend at merchants.

{{00:09:59}}
So again, what value does it bring to me?

{{00:10:02}}
I already have that
from the private sector.

{{00:10:04}}
We all have a million cards in
our pockets again, and, or we have

{{00:10:08}}
physical cash between those two things.

{{00:10:10}}
Is there something that the, digital
Euro or the CBDC will bring, from

{{00:10:15}}
a practical standpoint, actually,
there is no immediate value for me

{{00:10:21}}
as a, individual citizen, unless
I'm somehow financially excluded.

{{00:10:26}}
So again if, for one reason or another,
you don't get access to easy ways of

{{00:10:33}}
digital payments, for instance then
the, if you are a citizen and you have

{{00:10:38}}
no criminal background, you are able
to get a CBDC enablement done for you.

{{00:10:44}}
So, again, it is, a way for digital
and financial inclusion as the

{{00:10:48}}
European Central Bank has stated.

{{00:10:51}}
And most importantly, and again,
now I'm concluding to the reason why

{{00:10:56}}
these things are happening is because
especially the European Union is

{{00:11:00}}
very adamant that there needs to be a
public option for payments in Europe.

{{00:11:05}}
Currently, if you're paying anywhere,
you're paying with some kind of private

{{00:11:09}}
forms of money with private instruments
and private technology, whether that

{{00:11:12}}
is your credit cards or debit cards.

{{00:11:14}}
Whatever those things are, they're
controlled by private companies.

{{00:11:17}}
The  only way for you to get access to
a central bank liability today is by

{{00:11:22}}
having physical cash in your pocket.

{{00:11:24}}
So they, the central bank, wants to
ensure that you have access to central

{{00:11:28}}
bank liability, even in the digital
world, especially when the usage

{{00:11:31}}
of cash is diminishing as we speak.

{{00:11:34}}
So again, they want to ensure that
this access remains the reality,

{{00:11:37}}
even in the future, when most of
the transactions are fully digital.

{{00:11:42}}
That being said, it's also good to
conclude by noting that the central

{{00:11:45}}
banks do not seek to replace cash.

{{00:11:48}}
They actually seek to complement cash.

{{00:11:51}}
So physical cash, as far as the
central bank's current statements

{{00:11:54}}
go, will never go anywhere.

{{00:11:56}}
That will remain like an option
for people who want to use it.

{{00:12:00}}
But this is a kind of a digital
alternative for cash should you

{{00:12:03}}
want to use digital forms of money.

{{00:12:06}}
Yeah, that makes a lot of sense.

{{00:12:07}}
That's a really, great explanation.

{{00:12:08}}
I thought maybe by wrapping up,
I'm thinking of last year you were

{{00:12:11}}
able to give us a great crystal
ball look about embedded payments.

{{00:12:14}}
A year on out, what do you think or
hope we are on the conversation with

{{00:12:17}}
Central Bank Digital Currencies?

{{00:12:19}}
Yeah, so with with CBDCs I can already say
that there's going to be the next phase

{{00:12:25}}
in the project, which is the preparation
phase for the digital euro has started.

{{00:12:28}}
So again, we will be one year into that.

{{00:12:30}}
So it's going to be a halfway mark
for the digital euro preparation

{{00:12:34}}
phase one, like they call it
a very kind of a official way.

{{00:12:38}}
And kid you not it's phase two is
the second, the one after that.

{{00:12:41}}
But anyway, let's not get into those.

{{00:12:43}}
The so yeah, so we're going to be halfway
to preparation phase one and this will

{{00:12:48}}
in practice mean that we will have a much
clearer view on what does the rule book

{{00:12:52}}
look like, how does the user experience,
what are the actual use cases, what

{{00:12:57}}
is perhaps even some clarity on their
rollout schedule and the prioritization

{{00:13:01}}
of different use cases, which things are
in, which things are out, and then also

{{00:13:07}}
quite interestingly we're going to have
a lot of elections in during this year.

{{00:13:14}}
Because this is a public project, it is a
very political influenced project as well.

{{00:13:19}}
So we might be having
a turn in tide, maybe.

{{00:13:23}}
So maybe in a year we'll be talking
about why the politicians no

{{00:13:25}}
longer want a CBDC to be present.

{{00:13:29}}
But again, that's more speculation.

{{00:13:31}}
Just noting the fact that if the
political environment changes.

{{00:13:35}}
The destiny of CBDC might change as well.

{{00:13:37}}
We are, we live in a
democratic society anyways.

{{00:13:40}}
Absolutely.

{{00:13:41}}
Something definitely keep track
of and hopefully look forward to.

{{00:13:43}}
Yes, of course.

{{00:13:44}}
Fantastic.

{{00:13:45}}
Nice to meet you and great
conversation talking to you about

{{00:13:47}}
payments and again, about CBDCs.

{{00:13:49}}
Thank you.

{{00:13:49}}


{{00:13:50}}
And thank you as well.

Interview with Ville Sointu: Hi, I'm David
Penn, Research Analyst with Finovate.

He is the Chief Strategist for
Digital Currencies for Nordea.

Yes I wanted to start off with
a little bit of a looking back.

Last year you were with us and you
were talking about embedded payments.

I'm curious, a year later, would
you say that embedded payments have

taken off in Europe or we're still
waiting for them to clearly wrap?

I think we can say just as consumers
or even if you look at the numbers,

And yeah, it's, it was, obviously
the topic in Finovate, again, one of

So I'm again here one year later, but
yeah, embedded payments was all the rage.

And, for a good reason, it is
really the kind of the first easy

to understand a case or a use case
for, embedded financial services.

Instead of just talking about
embedded payments this year,

It's a broader portfolio of services that
are being embedded into the user flow.

So instead of just being able to pay
at the end of something or as a part of

something, now you have financing options,
you have insurance, you have even for car

purchases, you have things like leasing
or you're able to get different kinds of

credit lines established by now pay later.

So again there's a large
array of things happening.

And if you look at what this through the
lens of either simple thing like card

tokenization numbers or digital wallet
usage, or that kind of BNPL growth, all

So I can say that maybe one year
later, maybe we were onto something.

I was speaking with some folks
about generative AI and how

But when you think about it, embedded
payments was something else that

people as soon as they had access to
it, they really seem to get into it.

You mentioned some of
the different use cases.

It also had a pretty strong
trajectory out of the gate, it seems.

I think it really was service
like Uber, for example, that had

Nobody thought that actually that makes
a big difference, but ultimately anybody

who's been using these ride hailing
services understands that is really

big part of the attraction is that
it's just part of you open the door,

you get in the car, you get out, you
don't have to worry about the payment.

It's  almost like a prototype
experience of an embedded payment.

So it's again, embedded finance, things
like credit and things like this.

So it's really a very,
exciting development.

You just think about how it's almost been
a revolution in anti friction where people

are really starting to realize, wait a
minute, there's all of this middleman,

And what an experience I have now
and how it almost feels unearthly.

You're just getting in and getting out
and just moving on through your day.

And of course, there's the flip side
of that, which is that when things

become too easy, then the fraud, things
like this become a problem as well.

So that's another thing that we're
observing right now is that how do we

actually maintain control yet maintain
the simplicity in the payment experience?

This, of course, is some somewhat
constrained actually quite a bit

So of course there's PSD two upcoming PSD
three, the payment service regulation,

all of these things that are, defining
the user experience, especially when

it comes to things like strong customer
authentication, SCA, which is a big

topic for, for instance, account
to account open banking payments.

I'm curious about some of the other
developments in payments that are either

a part of embedded finance or sort of
rolling alongside embedded finance.

What are some of the other payment
trends that you're finding out

So the as my title implies, we're quite
interested in the digital currency space.

So basically we all know about the central
bank digital currencies, which we're going

to talk about a little bit later, I think.

But the other side of this
conversation is the private side.

Some people actually say that the
central banks had to react to the

private sector releasing their own stable
coins, especially in corporate payments.

So there has to be some kind of a
public option for this tokenized private

And yeah, that's definitely
one of the things.

So what is happening on the private
side for digital currencies?

And then of course the public side
again, represented by this central

banks as of today, other than that I
guess you cannot be in an interview

in a fintech conference without saying
generative AI a couple of times more.

So, yes, of course AI for fraud
prevention, AI for for basically

making the infrastructure more
automated, more secure, more aware

That's the that's the major
usage of AI for us for now.

Then, of course, the third trend
to maybe mention is sustainability.

So again, sustainable operations,
especially from the payment side I'm

Of course, we're looking into the payments
infrastructure and payment operations.

We want to make make sure that the
sustainability values are being reflected.

The very concrete example
of how we do that is that we

So for all of you suppliers, or one
of you suppliers, for those who are

Ville Sointu, Chief Strategist, Digital Currencies, Nordea, joins us again to discuss embedded payments, and this time, he delves into the future of central bank digital currencies in Europe, especially in the Nordics. Sointu explores the European Central Bank’s plans and shares his take on the inevitability of CBDCs.