Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King and I’m Jason Henricks. Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services.

From incumbents to unicorns and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks. Each year, the TCI Global Conferences bring together experts from around the globe to create progress in the practice of cluster development, regional competitiveness, and innovation support.

This year, their 26th annual conference headed to Reykjavik, Iceland, under the theme New Landscapes in Cluster Development, with a focus on sustainable and inclusive ecosystems that foster entrepreneurships, embrace digital technologies, and connect globally. We were there, and today we’re going to explore some of those landscapes. Naturally, I wanted to visit Reykjavik’s fintech cluster while we were there, but I also wanted to connect the dots to the innovation taking place in some of the other clusters that are active there.

Startups, health tech, renewable energy, gaming, and even the ocean cluster, the so-called blue economy. TCI describes the idea of clusters as little hubs of brilliance buzzing with innovation where intellectual capital and talent thrives and new ideas spark, creating the perfect environment for success. It’s a middle school essay writing trope to reduce description of a complex geographic and geopolitical environment to simply a land of contrasts.

But it is an apt representation here. After all, Iceland’s most famous nickname is the land of fire and ice, due to its combination of glaciers and active volcanoes, one of which started rumbling restlessly while I was there. Our gracious hosts at Business Iceland scheduled a stop for the visiting press to the iconic Blue Lagoon, the famous natural geothermal spa located near Grindavík, just southwest of Reykjavik.

This is probably a good time to apologize in advance for my horrible pronunciation of Icelandic names. Grindavík and Reykjavík are two of the easiest, so it only gets worse from here. If this were a written report, you’d never know how badly I’ll be butchering the names of some people and places who deserve better.

I have spellcheck. I need pronunciation check. You may have seen Grindavík in the news lately.

The city was evacuated after massive chasms ripped open in the street. The earth gaped wide from the larger of thousands of earthquakes that have literally been rocking the world over the past several weeks. When we arrived at the Blue Lagoon, the staff told us that part of the spa was closed due to this magma-induced seismic activity, and they gave us a brief overview of evacuation procedures.

The tremors continued to worsen, and they shut down operations a couple of days after our visit as a precaution. This was the first of several times I would hear a famous Icelandic phrase, one that is deeply embedded in the lexicon of Icelanders, and one that is used so often it’s considered by some to be the unofficial motto of Iceland, þettarðast, which loosely translates in English to, it’ll work out okay. Maybe nothing exemplifies the typical Icelandic mindset I discovered during my visit as succinctly as those two words, þettarðast.

It may be a gross oversimplification to write it off as merely positive thinking. I learned it’s also about quickly confronting large and complex challenges and harnessing the collective power of entrepreneurs, corporations, universities, and government to understand the root causes and to learn and apply new approaches. After an ethereal welcome by an Icelandic folk music trio, the TCI Global Conference opened with Áslaug Arna Sigurðbjörnsdóttir, Iceland’s Minister of Higher Education, Science, and Innovation, who shared an anecdote about why innovation has been a cornerstone of life in Iceland.

In the 1980s, cod fishing was about 80 percent of Iceland’s exports, and overfishing led to a national crisis. This forced the industry and the government to find better, more efficient, and more sustainable ways of operating. Today, the Ocean Cluster in Reykjavik is a community of over 70 companies and entrepreneurs in the blue economy, including companies in aquaculture, fish sales, and marine technology, but also in software, design, biotechnology, cosmetics, supplements, proteins, pharmaceuticals, and other high-value products that are produced from different parts of the fish.

Icelanders use up to 90 percent of every fish they catch, while many nations throw away byproducts that can amount up to 30 to 40 percent of the catch, a valuable resource that most often winds up in landfills or is thrown into the sea. One of the most valuable beverage brands in Iceland is Kolab, a unique caffeinated carbonated drink that contains collagen produced from fish skins that would normally be disposed of as a waste product. It doesn’t taste fishy.

It comes in familiar fruit flavors like cherry and apricot, passion fruit and lime, and strawberry and lemon, but unlike other popular drinks of this kind, this one helps reduce the waste from the seafood industry. During the 2008 global economic crisis, Iceland experienced a severe economic collapse that was among the most dramatic in the world. The crisis had a profound impact on the country’s financial system, currency, and overall economy.

All three of the country’s major banks collapsed, leading to one of the most severe regional recessions in the world. Inflation skyrocketed and unemployment more than quadrupled, sparking huge national protests. As the Guardian put it, Iceland is on the brink of collapse.

Inflation and interest rates are raging upwards. The krona, Iceland’s currency, is in free fall. Leaders acted decisively to implement economic reforms to stabilize the financial system.

Bankers were investigated and prosecuted for market manipulation and fraud, and dozens, including the CEO of Landis Banking, were sent to prison. The Prime Minister resigned and capital controls and currency restrictions were put in place. The economy gradually recovered, and by the 2010s, Iceland experienced steady economic growth.

Today, Iceland has a high standard of living and its citizens enjoy access to quality health care and education, and a relatively low level of income equality. Iceland’s fintech cluster is headquartered in Groska, the innovation hub located in the University of Iceland Science Park. The UI Science Park was established by the university in 2004 as a joint venture with the city of Reykjavik.

Clad in large glass windows with prominent vertical wood panels counterbalanced with large concrete surfaces, the building is a modern four-story Scandinavian design that blends harmoniously with the Icelandic landscape. The skylit atrium features a massive wall of live plants and an open staircase that meanders upward like a folding ruler, which inspired the center’s logo. Gunnlaugur Jónsson is the CEO of Iceland’s fintech cluster.

We’re bringing together all the relevant players in the ecosystem. So the largest banks in the country are our members. Also, the earliest start-ups, even start-ups that are just on the idea phase, have joined us.

We have more than 100 members, and we have this innovation center here in which we have around 10 members of the community, but of course, they’re spread around Reykjavik mostly and the surrounding municipalities. So, we’re tiny, Iceland is tiny as you may know, and so we work a lot with other clusters, the core of which are our neighboring countries, the Nordic countries. With the espresso machine hissing away in their large open lobby, Jónsson described the value of the Iceland fintech cluster’s reciprocal relationships with other countries in the Nordic fintech alliance and beyond.

Iceland is not a large country. Its population is about 370,000 people. That’s about the size of Florence, Italy, Canberra, Australia, or Honolulu, Hawaii.

Or it’s even smaller than Bristol in the UK. Because Iceland is so tiny, we need to rely on them. For example, there’s only 40 of me here at the Reykjavik fintech, while in Denmark they have 17 people.

So for example, they’re much better at relations in Asia than we are, and they bring Icelandic companies, have introduced Icelandic companies there. That’s very good. We’re just a part of an international cluster network.

We also have alliances with clusters in other countries. And if there’s anyone here from any such cluster that would like to connect or has a connection with any cluster of that kind, it would be great. Iceland is, even though it’s tiny, it’s considerably large in fintech compared to its size.

And the reason for that is, of course, that Iceland is quite isolated. We have our own currency. We’re in the middle of the Atlantic.

We have our own culture and language and our own legal system. And so we’ve had to build all the financial infrastructure as a large country would. And this has enabled a lot of people to get to know finance and fintech that wouldn’t have.

We have thousands of people that know something about finance and fintech, which a comparable size city, let’s say in England, wouldn’t have. So Brest in England, which is about the same size as Iceland as a whole, wouldn’t have all these different things. If there are aspiring people there, they would go to London, I would suppose.

And they use all the financial infrastructure around London mostly. Jonsson also described how the collapse of the Icelandic banking system actually helped to spur growth and innovation in fintech. You may be aware that in the banking crisis of 2008, the whole Icelandic banking system collapsed.

And that was because the Icelandic banks had grown to 12 times GDP around other countries and didn’t have a lender of last resort, banks in other countries did when that crisis hit. But through all of that and through all of that growth outside Iceland, we also have a lot of exposure to finance and fintech. There have even been examples where fintech companies have been founded on the basis of that.

For example, it was a disastrous deposit scheme that one of the banks had in the Netherlands. Disastrous may even be putting it mildly. iSave was an online high-yield savings brand started by Langebanke in 2006 that operated in the UK and the Netherlands.

Hundreds of thousands of British and Dutch savers lost deposits worth billions of euros after the bank went bust when Iceland’s financial system collapsed in 2008. This led to an international diplomatic crisis between the three countries, which dragged on for years. And that was based on a pretty good technology, an internet bank that was considered very good in the Netherlands.

And so they got a lot of customers there. But a group of people, both Dutch and Icelandic, bought that software out of the failed bank, created a company around it, and they’re now selling that system and a lot of other core banking systems around the world. Today, fintech thrives in Iceland.

On a per capita basis, it’s second only to Estonia for VC dollars raised in Europe. And nearly eight times the European average. We have the most, the fastest growing sector of the Icelandic fintech scene right now, I would say, is blockchain.

One of the companies based in the fintech cluster at Groska is Monerium, which is the first company licensed to issue fiat currency on blockchain. My name is Sven Valfoss. I’m one of the co-founders and the CEO of Monerium, which is the first company authorized to issue fiat on blockchain.

As in US dollars, as in euros, as in sterling, as in Icelandic krona. So we were authorized in 2019 under European rules. It turns out that Europe has had a license for what the Europeans call electronic money, but what effectively is stablecoin.

And it’s had this license since 2000. It’s been used by dozens of companies for various purposes, primarily prepaid cards, then for mobile wallets and then online services. But we’re the first company authorized to issue electronic money, aka fiat stablecoins, on blockchains under European rules.

And since the US doesn’t have rules for stablecoins, arguably we are the first company in the world to get the proper authorization to issue fiat money on chain. I asked Sven Valfoss to explain the advantages of issuing fiat currency on chain. Is that you get the certainty of having a regulated financial instrument on chain that is fully interchangeable with bank deposits, fully interchangeable and fungible with cash, and all the consumer protection of any other financial services company.

So our fiat on chain is the same fiat as you would use when you’re transacting with Transferwise or PayPal or Revolut in Europe. So it’s fully one-to-one, redeemable, exchangeable for any other bank deposit or comparable e-money instrument. So that eliminates the volatility of cryptocurrencies like Bitcoin.

So what are the advantages of being on chain? Well, the advantage of being on chain is having faster, cheaper, more flexible transactions. But Web3 has not really been fully accessible to mainstream users, whether individuals or companies, because you’ve had these intermediaries like routers exchanges that you need to go to buy stablecoin, which mostly are proxy or unregulated instruments. What we have done, because we’re a regulated, authorized, fully backed fiat on chain, we can interconnect with all the basic infrastructure provided by the European payment systems, for example.

And what we’ve done, which is also a first, is that we’ve integrated the main payment systems of the major currency of Euro with Web3, meaning that using our services, you can send money from any bank account within the European payment system to a blockchain wallet and back instantly, seamlessly, and we’re not charging anything for it. So no gas fees. There’s no gas fees.

There’s no transfer fees. And so you can move your Euro from any bank account in Germany, Lithuania, Italy, Belgium, wherever it is, you can send it to what is known in Europe as an IBAN address that we issue. We provide you with what’s the European equivalent of a routing number plus a bank account number, which routes the funds directly to your Web3 wallet or your smart contract.

So you can send the money and receive money to your IBAN, your Web3 IBAN, from any, you know, friend or a business partner into the Web3 IBAN and it magically appears in your Metamask or in your safe wallet. And then we provide the same service going back. So we seamlessly integrate Web3 with the Tritify banking systems and that enables all kinds of things to start happening, which otherwise would not be efficient or economical.

So we’re seeing this service combined with the regulatory certainty that the MICA regulation in Europe provides is powering all kinds of mainstream use cases that are coming online. One of the use cases that we’re powering is a visa payment card, which allows you to pay at any terminal, visa terminal, using our Eurozone chain. Another use case that we’re powering in this quarter is settling share transactions on chain in a German company.

So it’s both primary and secondary offering of a German company. So there’s all these use cases are coming online in Europe now because number one, we have regulatory certainty and number two, Monarium has provided a seamless integration between the European banking systems and Web3. So there’s no intermediaries, there’s not the friction or the cost or the latency of going through an exchange or a ramp.

I asked Sven about the huge gap between Web3 and the traditional payments infrastructure and what he thinks it’ll take to bridge that gap. It is a huge gap. And just like in the earliest days of the World Wide Web, you had dial-up, right? So you had dial-up to get online.

You actually had to use a modem of some sort to get your computer hooked up to the Internet. And now all these connections are seamless. There’s a comparable technical gap for Web3 to be bridged with the tradFi systems.

And there’s also a comparable regulatory gap because there’s essentially, while there are regulations for financial services in place, they need to be adapted and interpreted in order to facilitate and enable transactions using Web3. Europe essentially has bridged the regulatory gap and we are using our services and bridged the technical gap under the regulatory umbrella. And inside this regulatory framework, we bridged the technical gap of moving money in and out of blockchain seamlessly, instantly and at zero cost.

Beyond closing the regulatory and technical gaps, a large part of the work that still needs to be done is tokenization, which is essentially substituting sensitive data elements with anonymized or tokenized data that has no intrinsic or exploitable value. The next wave of adoption we see in our inbounds is essentially all these tokens. There’s a number of tokenization platforms coming online in Europe that are tokenizing all kinds of real world assets.

They’re tokenizing debt, they’re tokenizing equity, they’re tokenizing commodities, they’re tokenizing all kinds of hard assets. So it will take a time for these platforms to come online. It’s happening now, but it’s sort of like the early days of the Internet, first worldwide web pages, the web pages coming online.

So you can start surfing soon. You can start surfing in the sense that you’re not really surfing content, but you’re surfing assets. And you can already see some of the early instances of that happening in protocols like the protocol called COWSWAP, which is C-O-W, which stands for Coincidence of Wants.

You can start surfing assets and start seeing, you can use the euro and exchange it against whatever other assets, crypto assets are the primary assets still out there. But then you can start surfing and exchanging, looking for actively to exchange your euro for a share in a German company, for example. And this is happening now.

This is happening as we speak. Part of the challenge in bridging these gaps is that various parties have to agree on standards. They have to agree on standards.

So think about that. Money is a standard in some sense. It’s a standard to facilitate the exchange of value across distance and time and between people and companies.

And in modern society, you have a common standard, which is imposed but introduced by the government. And this money standard that in the U.S. is called the U.S. dollar and most of Europe is called the euro. This standard has to be on Web3 to facilitate the exchange of goods and services on Web3.

So we have provided that key dependency for mainstream economy to take off in Web3. I asked Van about the crypto scene in Iceland and how it’s been evolving over the years. Well, I actually first came across crypto or Bitcoin during a holiday in California, and at the time I was living in London.

So I came late to the Icelandic crypto scene. So Iceland, I think the most notable event in Iceland when it comes to crypto is that’s the first nationwide airdrop of a new cryptocurrency, which happened in 2014. So there was a coin called the Aurora coin that was dropped on the entire nation.

About 10 percent of the people redeemed it, but most people exchanged it for Bitcoin and sold it. So it never really took off. So that to me is a lesson in how difficult it is to get a new currency going.

Currencies are very sticky phenomena. And even in a nation like Iceland, which at the time was still recovering from the 2008 crisis and had foreign exchange controls and various other special measures imposed to help restore the financial services here. Even then, it was very difficult to get a new currency to take off.

I was also curious about how the systemic relevance of decentralized finance might have been impacted by the global financial crisis, given how broad and deep the pain was felt in Iceland. No, I think Iceland was the epicenter of 2008. Thankfully, the country has recovered since then.

But in the context of 2008, what is the relevance, the systemic relevance of blockchains to not just Iceland, but the rest of the world as well, is to provide an alternative way of storing and sending value to the too-big-to-fail financial institutions. So I think Web3 essentially is a fantastic addition to the financial ecosystem and also institutions such as ourselves. Monerium is an electronic money institution.

We are essentially focused on providing just digital cash and nothing else. We don’t make any loans. So issuing money on-chain provides an alternative to our users to hold and store money in ways that’s independent of a bank.

And legally also, it’s really important to note that electronic money institutions, we don’t issue, we safeguard funds. The funds that we hold are legally our users’ funds and they’re kept separate from our own funds. So it’s a safer arrangement in most respects than holding money with a regular bank.

Needless to say, Sven is very bullish on Web3 and DeFi as a force for good. Web3 is just about to unfold in a major way. It will be slower than in many ways the Internet, because it’s a permissioned system.

Financial services are permissioned and they need to be permissioned, just like transportation needs to be permissioned and regulated. But it’s going to be a huge wave of innovation. You can’t be bullish enough on DeFi, in my view.

Maybe financial crime, money laundering and fraud will be a thing of the past in a decentralized Web3 world, but somehow I doubt it. They are certainly things of the present everywhere in the world, and those who are fighting and investigating financial crime have a difficult task of sorting through a massive amount of data from many sources. And it can be challenging and time consuming to separate signal from noise.

Lucidity is an Iceland-based company that’s trying to make life easier for these investigators through new tools, including generative AI. Selena Pablo is Lucidity’s senior marketing manager. Lucidity was founded in 2018, in November.

And back then, all the way up until now, we’ve been working on a suite of different products. So we have our case management solution, actor intelligence, regulatory reporting, and then also our Lucy co-pilot solution. So I can take you through an example of what a day in the life of an analyst looks like, for example.

So in an analyst’s day, they spend about six hours of their day looking into different systems, trying to combine different data sources and understand whether a particular case is a potentially suspicious case of money laundering or whether it’s just a false positive. So they receive an overwhelming amount of data and they’re just trying to like filter through this and make sense of this data. So what Lucidity does is we provide one solution and one place where an analyst can find all that information.

And we paint a picture of the story of that case so that an analyst can determine whether it is suspicious or not. And on top of that, we have the Lucy co-pilot solution, which is a newly launched generative AI solution. It is one of the first of its kind out there in this market, and it essentially guides the analyst through the process, helping them make sense of the data and provide greater insights, also automating some of their tasks and helping them with, for example, writing a disposition narrative.

And it can essentially take a case review time from two and a half hours, three hours. Some cases take like three to four days to review all the way down to 30 minutes. Part of what can make the process so challenging and time consuming is legacy systems.

Yes. So one of the biggest challenges is that a lot of financial institutions, especially bigger banks, are leveraging or using legacy systems that they’ve put in place 20 years ago. And this can consist of very clunky systems that have really bad user experience or a mix of Excel spreadsheets.

And it’s really hard for them to let go of these systems because they’ve invested a lot in these systems as well. There is a lot of processes built into them. We don’t require the financial institutions to rip and replace their systems.

We then sit on top of their existing technology and augment it with additional insights. So, yes, essentially it’s being able to take the data that comes out of what they have and enhance it further. The idea is for Lucy, their generative AI copilot, to help bring some consistency and efficiency to the process.

I asked Selena for some examples of what that looks like today and how the tools may evolve over time, given the current challenges that financial institutions have as they consider implementation of generative AI. What the Lucy copilot solution does, for example, is when our solution then takes the information and presents it, Lucy then enhances it. So I can give you some examples.

One is if you have a junior analyst investigating a case and they want to understand, for example, what rapid movement of funds is, they can ask Lucy what it is and Lucy will explain rapid movement of funds as well as the company’s procedures for how to further investigate it, as well as the suggestion of the next steps. And so this helps bridge the different skills that analysts may have, because several different people might receive a case with the exact same information and go through different processes and procedures to investigate it further. And so we help standardize that process.

Another practical example is writing a disposition narrative, summarizing your decision of why you’ve decided to further investigate a case or mark it as a false positive. And so, you know, who really likes writing these narratives? It’s like writing an essay in university, for example. And so this can often take a very long time.

And what Lucy does is it then generates this disposition narrative based on the information that it’s gathered. But the human is always in control of the process and can edit the narrative as well as is required to review it. So our solution is modular and financial institutions can decide what they would like to incorporate based on their needs and also what features within each module they would like to leverage.

So different companies might want to, for example, use our rule builder if they’re just doing their financial crime investigation using rules, whereas others might be more comfortable leveraging AI. And with the Lucy copilot at its launch, we launched it with 27 skills of things that it could do to help improve the lives of analysts. And we are working on always adding to this database of skills.

And by the end of next year, we hope to have over 100 skills. One thing that Lucinity is looking into is the ability to summarize documents, for example. So taking a look at an annual report and asking Lucy questions about the annual report and pulling information from it, and then Lucy being able to attribute the source of that.

So one big challenge with generative AI is actually around the attribution of it and the reliability of generative AI in terms of how did Chattopiti come up with this answer? Like, where did it come from? And that is a challenge with financial institutions. And it’s one of the biggest roadblocks that prevents financial institutions from implementing it, because when it comes to the regulators and auditing their processes, how do they know that their processes are robust and that a human has actually gone through the due diligence to make sure that the information is accurate? So they don’t want to black box. Yes, exactly.

So I think that one of the key, one of the keys to implementing it is the ability for generative AI to explain how it came up with this answer and where its answer came from. Financial crime is a global problem, but Lucinity thinks its base in Iceland can help them connect the dots. There could be huge benefits from increasing collaboration across multiple institutions and multiple governments.

And early tests seem to bear that out. Yes, so in Iceland, we are serving over 30 percent of the market, so we have a lot of the major banks here. And our goal is to make to start off with actually Iceland being one of the most one of the safest financial systems in the world.

Most of our customers are within Europe and North America. And we’re within Europe, for example. One of our customers is Currency Cloud.

They’re a visa solution. They use Lucinity’s actor intelligence and case manager, and Palio uses Lucinity’s whole suite. Within the U.S., there are also tier one banks that we work with.

And since we launched Lucy, the response has been just overwhelming, like we are gaining so much more traction and visibility from large banks and financial institutions. So the way that the financial crime prevention currently works typically is that it is within a single institution, which is actually a really huge problem in the industry because it is much more difficult to actually track down the financial crime. And what the power of financial crime prevention is really harnessed when you’re looking at it across institutions and across borders.

So Lucinity has actually recently collaborated with the Bank of International Settlements, the Nordic Innovation Hub, on a project called Project Aurora, wherein we tested different privacy enhancing technologies in order to see if we could analyze the data across institutions and borders without sharing sensitive information. It was a big success. So we launched a proof of concept and we tested different methodologies to see if it was more effective to fight financial crime across institutions and across borders.

And it definitely is more effective. The results were really clear and there is tangible use of these different approaches. But the thing is that we require collaboration from different institutions.

Like, it’s not just that we can deploy this across different banks and fintechs. We really need collaboration from government, law enforcement and financial institutions to make this happen. As with any kind of AI use case, more data and more diverse data sources help to improve outcomes.

Right now, what we’re trying to do is to tap into various pools of data that financial institutions want to have access to. So, for example, one is like Lucy can search the Internet. The other ones are that we are integrating with different companies like Neterium and Sion.

So Neterium does name screening and it’s able to help detect whether a certain name is associated with any sanctions, for example, or Sion is able to help us detect in real time whether a transaction is fraudulent. And so with Lucy, you’re able to tap into all these different systems and pools of data and then come up with a more comprehensive response. Well, could Iceland, this tiny country about the size of Kentucky out in the middle of the North Atlantic, actually become the global center for using data to prevent money laundering and financial crime around the world? I would say that if we were to pick a place to start, I think Iceland would be great.

When I first moved to Iceland and started working for Lucinity, it was quite interesting because I was like, what is this anti-money laundering, financial crime prevention company doing like in an island in the middle of nowhere? And it’s always interesting when people hear that Lucinity is from Iceland. It always like gives them a spark in their eyes and makes them feel like, oh, Iceland, like, what is it like there? What are you guys doing there? And it’s a really unique and interesting place to be because Iceland has a really strong talent pool of technical professionals and programmers, for example. And we’re also ideally situated in between North America and Europe.

And so we have a presence in Europe. We have a presence in North America. And it’s also a great place to start off in terms of like it’s really easy to just call up the chief executive officer of a bank or even you can ask one or two people and you can call up the president of Iceland, for example.

And by doing this, Iceland is like a great place to start collaborating. And for us to have launched our initial products, for example, so we launched some of our first customers were Icelandic banks and then to be able to test different technologies and then scale that globally. So as we can see, by having a presence in Europe and then also in the U.S., it’s really easy then for us to have this like global reach.

Iceland is a land of diverse landscapes, waterfalls, hot springs, glaciers, geysers, black sand beaches, diverse seasonality with the midnight sun in the summer, contrasting with the polar nights when the sun barely rises above the horizon. During my visit in early November, I was surprised that sunrise was not until 930 a.m., but that’s life at 66 degrees north. And yes, I did get to see the northern lights.

They were amazing. Diversity is a way of life in Iceland. The country is ranked the number one most LGBT friendly country in the world based on rights, laws and freedoms, as well as public attitudes.

And for the 14th year in a row, it again ranks number one in the World Economic Forum’s annual global gender gap report, having closed more than 91 percent of the gender gap compared to a global average of just under 69 percent and compared to 75 percent for the U.S., which ranks 43rd. Men and women are nearly at parity when it comes to educational attainment, and women in Iceland have a high rate of political participation. Over 40 percent of ministerial and parliamentary positions in the country are held by women.

In 1980, it was the first country in the world to elect a female president, and there has been a female head of state for 25 of the last 50 years. Iceland is one of only two countries where women have held the highest political office for more years than men, the other being Bangladesh. Despite all this, a gender pay gap stubbornly persists.

90 percent of Icelandic women, including the prime minister, participated in a one day strike in October to protest the gaps, along with gender based violence, and to call attention to the unpaid work that often falls on women, such as child care. The Nordic Women in Tech Awards is an annual event that recognizes and celebrates the achievements of female role models who are leading the movement for more women in tech in the Nordic countries. This year, the event took place in Reykjavik, and the first lady of Iceland, Eliza Reid, took the opportunity to say, good enough is not good enough when it comes to measures of diversity, equity and inclusion.

You know, I’ve spoken a lot about gender equality, women’s empowerment, Iceland and lots of different occasions. People always say, what can we do better? And it’s always those three things that I mentioned, you know, gender based violence, diversity, private sector investment. But I’ve now decided recently that there’s another thing that we need to be looking at here in Iceland, at least.

And I suspect a lot of the Nordic countries, and that’s what I call the inertia of good enough. And what do I mean by that? In Iceland, in the Nordics, we have achieved a lot when it comes to working towards greater balance. And that’s something we should absolutely be celebrating and that important.

But is good enough really good enough? Is the fact that in theory, women and underrepresented genders are entitled to equal pay for equal work good enough, even if that doesn’t always happen in reality? Is the fact that we have excellent paid leave for both parents good enough if not enough fathers are actually taking the paternity leave? I don’t know that it is. And I think that in these countries where we have so much fortune and privilege, we need to remember that this is a constant battle and a constant area that we need to continue to look at, because I don’t think that good enough is good enough. Reid was born in Ottawa, Canada, and moved to Iceland in 2003.

I say that especially as a proud Icelander of foreign origin who speaks Icelandic with accents and makes many an embarrassing mistake in in the language, but knowing that that does not mean I have something less important to say. I also think in the private sector in Iceland, we actually come in 57th when it comes to gender representation and management of senior companies. I think that that’s something we’re probably far behind our Nordic friends in, but it’s also very important to be talking about who is controlling the money and the pocketbooks and the innovation and the development.

And that’s why this sort of event is so important when we’re talking about the tech scene and making sure that we’re getting a diverse range of ideas and solutions, making sure that it’s women who are doing investing and that women-led companies and diverse groups are being invested in. Despite good enough not being good enough, Iceland is well positioned to build on its leadership role. For the second time in three days, we heard again from the ubiquitous Áslaug Annars Sigurðardóttir, Iceland’s Minister of Higher Education, Science and Innovation.

She was previously the youngest female minister appointed in Iceland’s history and the youngest minister of justice ever appointed in world history. She talked about both the risks and the opportunities of technology in driving better outcomes and equity and inclusion. And it is really exciting to have those pillars together and to be following everything that is happening in the Nordic on innovation and tech, where we can also be a leading example for other countries, how we do things, how we acknowledge them and how we use all the manpower in our countries, both female and men.

Because the world is just changing so fast, equality is not given and it’s not given in tech either. We always have to be on the lookout. Gender bias is hidden in many places and works in both directions.

We see this in many parts of our society. I really believe that with those kind of women that are in this room, that we can really keep on changing the world. And there are so many wonderful things already happening that we need to cherish.

And I think that this award is a big part in lifting up the wonderful women we have in tech in the Nordic, seeing them and cheering them on, because I know that this will matter for the next generation and this generation and the ones that come. Thank you so much. Welcome to YS&L.

In fact, technology itself may be part of a solution. Pay Analytics was founded when a frustrated HR manager found that several well-intentioned efforts to address his firm’s gender pay gap through annual salary reviews were not successful. Pay Analytics is a suite of compensation analytics tools focused on helping companies better measure their pay gaps and better measure the tactics that actually work.

So we are in the business of pay equity and workplace analytics. We are here in November already, 2023, and I think we can all agree it’s simply no longer acceptable to pay someone lower wages because of the color of their skin or their gender or any other demographic variable, right? However, importantly, good intentions won’t fix demographic variables. So in fact, Pay Analytics was founded when an organization had measured an 8% pay gap.

So what do I mean by 8% equal pay gap? It means after accounting for the job role and the skills and the knowledge and the performance, a woman within that organization could expect to be paid 8% less than a similarly situated man. So obviously, everybody was outraged, right? 8% is huge. So the whole management team was on a board and everybody was going to be super mindful about it and all of their decision making, right? So whether hiring, you know, promotions, ad hoc salary adjustments.

But then when they measured the pay gap again, some months later, well, it was still 8%. So it became very clear that we don’t close these demographic pay gaps with good intentions alone. So what we have done, we have built a cloud platform.

Another Icelandic company using data and analytics to improve diversity, equity and inclusion is Alda. Sigun Jonstadir is the company’s CTO. I’m Sigun Jonstadir and I’m the CTO and co-founder of Alda.

My background is mainly in management science and engineering. I’m a software engineer and I’m also really obsessed with biases in AI right now. Alda is a DI startup.

We just released two months ago a DI SaaS solution for organizations worldwide. And we are really here to change the scenery of DI solutions by creating like this, not only a short term, but a long term strategy in DI. I asked Sigun how Alda compared to PayAnalytics.

So we’re not in the same space as they are. And they do this amazing pay gap analysis and values of jobs and all of that and help companies like close their pay gap. And we decided that that was a space, a crowded space and really great companies working there.

So our focus is always culture and DI on that term. Yeah. We come from like the consulting industry.

So we used to be DI consultants and just like in-person consulting. So we did DI and management consulting for organizations in Iceland. And we really felt that we didn’t have or organizations didn’t have the data needed on inclusion and experiences to really measure DI.

And there was no platform to gather the data. And we really had to create the matrix ourselves. So we wanted to create this platform that does that for you.

And we really saw that DI is just something that everyone wants to do better and improve and have covered. So the need was to digitalize it. The need was to create something scalable, more scalable than the consulting exactly.

And we wanted to go global with this, like you said, like standing on the shoulders of the Icelandic ways of reaching equality. Transitioning from a consulting company to a software company has been a lot of hard work, but clearly it’s a labor of love. I love it.

So it’s two months old. So I like I love it like a baby, you know. So we started software development one year ago and we set out to just create the digital version of our consulting methodology.

It has a dashboard for HR or DI managers where they can have complete overview of their DI matrix gathered both from their HR data and we just integrate with your HR system and you pull up the data there and display it. And then we have this inclusion survey to measure how people feel at work and if there is a difference between which groups you belong to in the scale of inclusion. And we are always doing that.

We’re always trying to identify if the if the experience of people in the workplace is different depending on who they are. And then we have like a detailed action plan for you once we have the status completely analyzed, what to do and how to improve and where to go. So you set goals within the platform and then we have an AI driven action plan tailored for you on how to reach those goals.

And we are also a production company, so we release micro learning courses for both managers and employees on DI topics, which is like an endless topic list, of course, of DI topics. But we are trying to take our consulting experience and we use humor and games and empathy creating exercises to get everyone to the table and bring people into the empowerment of wanting to know more and liking learning about DI. What is the role of AI in what you’re doing? So it’s basically an amplified intelligence based on our consulting experience.

So obviously, the recommendation engine in the software now is based on our experience and what we know is supposed to be done when. But I’m developing like with a team now of data experts, an AI model, machine learning to begin with, obviously, to further enhance these recommendations. So give me a kind of a practical example.

If I’m a manager of a company and I employ your platform, how’s my life different? OK, great question. So the life of like an HR or DI manager today in a lot of cases is that they have the other role of owning DI in the company and they lack maybe the overview of these metrics that you need to have, both in terms of compliance and also in terms of just reporting to your senior managers or your co-managers on these issues. So you have maybe in your HR system, you have all the data, but you don’t have the analytics to do it.

And you have to pull it out, analyze it in an Excel sheet, put it into a PowerPoint and measure the data there. With Alta, you have just a real time connection with your HR system and somebody like creating the metrics for you, the key metrics to measure DI. And you can also then see the trends and get recommendations.

So we’re taking the analytics part of DI, the weight off your shoulders, because we’re both analyzing it and also like giving you the action plan and telling you like, hey, this is interesting, please do this. Then we have the clear goal settings. And this is so important, like every manager knows, you have to have some KPIs and something to benchmark against.

And in Alta, you can benchmark with others in the solution and how they’re doing in DI, both in terms of like, you can benchmark with companies from the same industry, the same size, something that makes sense to you. And then you can set like a goal that makes sense for your organization, based on your needs. And then, of course, the micro learning is a complete game changer in DI learning.

A lot of DI learning is now in either workshops, in person, really heavy to plan, really time consuming for people. And a lot of times it’s not as effective as something you would do in like one or two minutes in a game on your phone. So you have like the time saving there and just the like organizing and everything, get rid of that.

And you have something always ongoing in DI learning. Also, I must say a lot of like DI topics and learning courses can be a bit like heavy, you know, it’s a sensitive topic and it can be heavy and you can get people on the offense, kind of like defensive about if you’re talking about maybe unconscious biases or something, people are not always open to learning about it. So we are trying to take the approach of like it should be fun.

DI should be fun. It should be work that you love doing and it should be topics that you would love to know more about. And we want to create this like fun and rewarding experience for employees.

Why did you start the company? So so me and my co-founder, Thore, we started the company, of course, because of our passion for DI, but we also just want to make a great business and we just want to share this method with the world. So, yeah, I think that’s the short answer, but I can also give you the I’m just going to say like it’s just we were in desperate need of a solution like this. It didn’t exist, so we had to build it.

Yeah, exactly. But where are you in terms of roadmap and traction, funding? Where’s the company today? So we got our preseed funding 18 months ago. It was 2.2 million euros from VCs and angels.

And we just opened like a seed round a month ago, which we will probably close now in Q1 2024. We launched the product that went live two months ago after like one year in development that we really like hit all our milestone in that development process because we have an amazing team. And just like I can’t say it often enough, like how grateful I am for the team.

And we initially thought about just launching in the Nordics. And of course, we have a really strong market position already in Iceland. We have, I think, 12 now customers started before we launched.

So we have 12 pilot customers developing the product with us. And yeah, we’re set up for the Nordics in Europe. But we have also quite like early and quite unexpectedly gotten attention from U.S. companies.

So we’ve been getting a lot of requests already. Is that in the plans or was that a surprise? Well, in the future, obviously. So it came maybe earlier than we expected.

But maybe that just talks to the need that I’m talking about. And we are really the solution is really compatible with any, you know, location. So it really doesn’t matter to us.

But you don’t think you’ll have to adapt too much for the U.S. market? We’ll have to be compliant there. And we just developed everything from scratch for the world, you know, so we localize really heavily for markets, both in terms of language and culture and compliance. And that’s just always been a huge part of like the technical architecture of the solution always keeps this in mind.

We need to be able to localize on demand, basically. So we’re set up for success in that area. In the U.S., there’s also been a little bit of a backlash of DEI from some.

Have you seen that in other countries or is that unique to the U.S.? I haven’t seen such like a strong backlash like the anti-woke laws, which is like the biggest backlash I’ve seen just ever in DEI in other countries. I haven’t seen that. And I think like in terms of the anti-woke or the states that have implemented or like executed these laws, we would probably be illegal there, you know, so that the micro learning is against these anti-woke laws.

It’s education about the people and their diversity. So we at least we won’t go there to begin with. But hopefully this will just change back.

And the backlash in all like human rights movements and DEI, it’s something that happens regularly, but I feel like it impacted this DEI business less than we originally thought. We, of course, we were worried when we saw this happening. But research like Gartner Research shows that executives are increasing or just keeping their current spending in DEI because I think people just want to fight back against that backlash.

You keep mentioning metrics. What are kinds of metrics are you talking about beyond just demographics? So we really look at, of course, the different groups within the company. We’re always focusing on that in all of our analysis.

So we we analyze inclusion and we built the inclusion survey on our qualitative interviews from the consulting. So we found a way to quantify experience, basically. And that’s like a key metric for us, of course, to measure inclusion based on DEI groups.

Then we have a hierarchical analysis of career development within the company. And then we, of course, analyze, recruit the talent pipeline and the retainment of people. So looking at maybe like a classic example, you’re a tech company, you’re having a hard time hiring women for technical roles and you do like you want to do like an improvement project on that.

And you managed to hire 50 women one year. And then you forgot to create an environment where women would thrive as much as other genders. So then you have a problem retaining women.

And we point that out and analyze it and come up with suggestions on how to improve on that. This is like a key thing, because we all know how difficult it is to retain good people. And it’s more, of course, the most valuable thing you have as an organization is your employee group.

So you talked about the diversity and inclusion parts. What about equity? Are you measuring that as a part of the metrics? Yes. So we have some analysis on basically, you know, equity as in terms of like just everyone having the same rights and opportunities and access.

So we measure equity as well in the survey. And we also talk about equity a lot in our courses and how to create environment where everyone matters and thrives. Yeah.

Which is maybe harder to measure. Yeah. And that’s like what’s so amazing about the work we did, like developing this quantification of these really qualitative topics.

And we have really strong research partnerships with some organizations here in Iceland and the University of Iceland. And that’s why we always keep, you know, being cutting edge, because we just partner with the people who are the most academic experts in this research at any point in time. I wanted to hear from some of the women controlling the purse strings and making the investments that First Lady Eliza Reid talked about.

So I sat down to lunch with some of the country’s top women VCs at Hovastudent, an art and culture center in Reykjavik that permanently displays Chromosapiens, a multisensory, large scale art installation by the artist known as Shoplifter. The immersive walk-in installation consists of three caves made from Shoplifter’s signature material, vibrantly multicolored synthetic hair extensions, and filled with soundscapes from the Icelandic band Hum. The intent of the experience is for visitors to walk in as Homo sapiens and walk out as Chromosapiens.

Over a smorgasbord of small plates and a few cans of colab, a dozen or so VCs and entrepreneurs talked about the tech landscape in Iceland and the Nordics. We talked about technology and innovation and FinTech, DevOps and renewable energy. And more than once, the conversation turned to health tech.

So when I’m investing myself, I mainly, but not solely, invest in health care and health tech companies. But I’m also chairman of the board of a VC fund, or actually two VC funds. And one health tech company in particular.

Last we have Kerasys, have you heard about the company called Kerasys? Kerasys, which in July became the first company in Iceland to be valued over one billion dollars. Iceland’s first unicorn, when it signed an agreement with a Danish company to be acquired for up to 1.3 billion. Kerasys is a medical wound care company which develops products from fish skin that was a byproduct from the fishing industry that used to be disposed of and is now used to protect and regenerate human wounds and heal damaged tissue.

So health tech meets the blue economy. Intact fish skin is being used for the management of chronic wounds such as diabetic wounds, pressure ulcers, vascular ulcers, draining wounds, trauma wounds and surgical wounds. Because there’s no known viral transfer risk between North Atlantic cod and humans, the Kerasys patented fish skin is only gently processed and retains its similarity to human skin, unlike mammal based skin.

Another company that came up more than once in the discussion was Prescribey, which is taking a novel approach to curbing opioid addiction. We’re really looking at the problem from one angle and there’s another angle, a big angle that we haven’t spoken about as much. And that’s what leads up to people getting addicted.

You know, so there are several ways how people end up with addiction. Prescribey was started by Karten Thorsen, a physician who dealt with the challenges of opioid dependency and addiction firsthand, often writing 30 prescriptions a week, knowing that statistically one in 10 of his patients would end up developing an addiction. It’s not exactly fintech.

OK, it’s not really fintech at all, but it’s a huge problem and they’re taking an innovative yet practical approach to solving it. If you want to hear more, you can listen to the entire interview on the Futurist podcast right here on Provoke.FM or anywhere you get your podcasts. During my week on this tiny island in the middle of the North Atlantic, I talked to people from fintech and other industries, and the theme that kept coming up over and over again was that of building bridges, bridging gaps between established companies and startups, between industries, between cultures, countries and continents, building bridges and connecting dots.

And that’s really what fintech has become, the connective tissue that connects us all in an increasingly interconnected world. I also grew increasingly convinced that one way or another, it will all work out OK. Tata for a dust.

Thanks to everyone who made time to talk with me. Thanks to Finn Partners for the kind invitation to Iceland. And thanks most of all to our gracious and generous hosts from Business Iceland for arranging the interviews, the tours and countless little details, including driving me to the local soccer club, Nettspurnfjallgreikavik, to make sure I didn’t leave town without a jersey to add to my collection.

And that’s not to mention all of the delicious Icelandic food and drink. Skal! That’s it for another week of the world’s number one fintech podcast and radio show Breaking Banks. This episode was produced by our US-based production team, including producer Lisbeth Severins, audio engineer Kevin Hirsham, with social media support from Carlo Navarra and Sylvie Johnson.

If you like this episode, don’t forget to tweet it out or post it on your favorite social media or leave us a five star review on iTunes, Google Podcasts, Facebook or wherever it is that you listen to our show. Those actions help other people find our podcast and in return, that helps us build an audience that can be supported by sponsorship so we can continue to provide you with our award winning content every week. Thanks again for joining us.

We’ll see you on Breaking Banks next week.