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Iceland 2025

Market Overview
Payment Organisation Greiðsluveitan
Domestic Payment Brands No domestic payment brands.
Market Structure Card use in Iceland is the highest in the world, reflecting the extension of card payments into new areas. As there is no Giro system, cards take the place of direct debits for recurring payments.

In 2023, there were 117.1 million transactions on debit cards, equivalent to 302.0 per capita. Including credit cards, per capita payments were 538.1.

Sedlabanki launched a new RTGS in 2020.

The UK-based payment service provider, Rapyd Financial Networks, acquired the Icelandic payment businesses Korta Pay (2020) and Valitor (2021).

In 2020, payment service provider Salt Pay acquired a 63.5% stake in the Icelandic payment business Borgun and now owns 95.9% of the company’s shares.

Emerging Open Banking payment ecosystem.
Notable Market Trends Contactless rollout: cards, POS terminals, mobile payment apps.

Following the COVID-19 pandemic, in 2021 the number of ATM cash withdrawals fell by over 6% from 2020, whereas POS payments rose by over 14% from 2020. In 2023, ATM cash withdrawals recorded a decline of 1.1% growth and POS payments sustained an uptrend, rising by 7.9%.
Major Card Issuers Islandsbanki, Arion Banki, Landsbankinn.
Major Card Acquirers Borgun, Valitor, Korta Pay.
Major Card Processors Borgun, Valitor.

Key Statistics 2023
Population  387,758, with 2.56 cards per capita
Cards Debit: 469,661

Credit: 523,811

Total payment cards: 993,472
Card Payments in Iceland  All cards: 167.94 million; value ISK 1,101.6 billion (€7.38 billion)
Card Transactions Debit: 117.1 million; value ISK 684.3 billion (€4.59 billion)

Credit: 91.6 million; value ISK 773.6 billion (€5.19 billion)

All Icelandic cards used, both domestic and abroad:
208.7 million; value ISK 1,458.0 billion (€9.78 billion)
POS Terminals 15,620 (estimated)
POS Payments All cards 202.2 million; value ISK 1,406.0 billion (€9.88 billion)
ATMs 210
ATM Withdrawals All cards: 2.24 million; value ISK 68.73 billion (€0.48 billion)
Digital A2A Payments Cards is the dominant cashless payment instrument in Iceland. There are no giro systems in Iceland.
Note: Icelandic card business statistics are different from the ECB statistic method standard.

Note: Italic forecast figures for 2024F are estimated in the payment market context based on 2023 figures.
Source: Sedlabanki Islands (Central Bank of Iceland); Statistics Iceland (population).

General Note – ECB changed its statistical reporting

In the 22nd Edition of the Digital & Payment Card Yearbooks there were some statistical reporting changes to address. The statistical data for 2022 was based on the new ECB regulation ECB/2020/59, which replaced the ECB reporting statistics regulation from 2013 up to 2021 (ECB/2013/43), the well-proven ECB bluebook reporting was discontinued.

For 2022, the ECB declared all data as provisional, because the first-time reporting under the new standard may include errata and double counting.

The researchers and editors worked hard in the 22nd edition to balance out any obvious errata, but it remains that in some instances the data from 2022 cannot be compared to 2021 and previous years.

Where this has occurred, we have clearly stated it and have added explanation to the table and text.

In this, the 23rd Edition we have clarified any errata and filled in all missing data from the previous year.

Introduction – Payments in Iceland

Iceland is a parliamentary republic with a unicameral parliament (Althingi). The parliament has 63 members elected to serve four‑year terms. The president is directly elected every 4 years.

As a member of the EEA Agreement, the legal framework in which Icelandic financial institutions and companies operate is based on European Union directives. The EEA Agreement also makes the Icelandic financial system a part of the European Single Market area.

The adoption of the revised Payment Services Directive, PSD2, and disruptive technologies have set the stage for digital payments for the digital economy in Iceland. They have accelerated digital payment transformation and mobile payment services, as well as cardless IBAN -based payments directly from bank accounts.

In the last decade, Icelandic consumers have embraced mobile devices such as tablets, smartphones, and Internet of Things (IoT). This change significantly impacts their shopping experience. Consumers become increasingly connected and they have started to purchase anywhere, at any time, from any device.

In addition, new consumer demands are a game changer. Icelandic consumers like digital banking apps with access to all their accounts at different banks in one single app, with the option to make payments directly from their bank account of choice. Additionally, they appreciate more banking services and payment services added to their mobile banking app. Consumer adoption of digital payments in Iceland is driven by minimal cost, secure payments and a high level of user convenience.

Driven by the development of social media and mobile devices, the emergence of permanently connected consumers has impacted their interactions with brands but also their expectations of how to shop using the increasing number of touch points between consumers and merchants, e.g.:

The ongoing rollout of a mature online and mobile communication infrastructure is an enabler for digital card payment transformation and for Open Banking payments in Iceland.

In a few years from now, mobile banking apps and mobile payment apps are expected to combine account management, digital payment services, personal finance management and value-added digital services from location finders to digital vouchers.

Cash payments, card payments and cardless payments directly from bank accounts (A2A payments) remain all relevant for Icelandic merchants and heavily used by Icelandic consumers.

This country profile provides an introduction into two competing payment ecosystems in Iceland:

Legal Framework for Payment Services

The legal framework for European payment services is a joint project undertaken by the European Commission as the regulator, the European Central Bank (ECB) as the Euro System, and the European Payments Council (EPC) with the objective of standardising payments in Europe and to remove existing barriers, promote cross-border competition between payment services, strengthen the European internal market and drive the digital payment transformation.

Based on its vision, the EU Commission has therefore created a unique legal framework for cashless B2C and B2B payments that supersedes pre-existing national legislation and is binding for financial service providers and payment service providers throughout the EU.

Iceland has largely transposed this legal framework into its national payment legislation.

Historically, there has been a de facto national regulation of all Icelandic payment schemes with high technical barriers to ensure and defend payment security.

With the implementation of the payment services directive, all payment services in Iceland are based on the unique legal framework for payment services of the European Commission effective in the European Economic Area (EEA).

In addition, the respective rules and regulations of the domestic card scheme and the international card schemes continue to be applied by the card payment service providers (e.g. EMV, PCI, RTS, SCA, and SEPA Cards Framework), respectively.

Legal Framework relevant for Payment Services in Iceland

The revised Payment Services Directive, PSD2, had established a legal and regulatory framework for payment services providers, enforcing several protections for their clients such as safeguarding of funds; and required them to execute processes in accordance with banking regulations, such as KYC and AML. It has already resulted in significant progress regarding the integration of the European retail payments markets.

Following the alignment with the EEA region, the legal framework for payment services in Iceland includes the directives and regulations of the European Commission (EC), the ECB, and/or the national central bank (NCB) of the individual country.

All card payment service providers and all cardless payment service providers of the Open Banking payment ecosystem must apply for the European legal framework including:

Revised Payment Services Directive (PSD2)
PSD2 is the key directive for borderless banking and payment services in Europe.
Among others, PSD2 regulates digital payment services and payment service providers such as payment institutions, e-money institutions, payment initiation service providers and account information service providers. PSD2 formulates the Open Banking Mandate for regulated access to payment accounts.

General Data Protection Regulation (GDPR) – effective from May 2018
GDPR establishes a regulatory framework for customer control of their data through consent mechanisms, the right to be forgotten and the right to retrieve all personal data for re-use at other service providers of choice, thereby preventing a ‘lock-in’ situation.

E-Money Directive (EMD)
The EMD sets out the rules on the business and supervision of e-money institutions.

Anti-Money Laundering Directive (AMLD)
The AMLD6 aims to improve the harmonisation of the criminal liability of money laundering and terrorist financing across the EU27.

Customer Rights Directive (CRD)
CRD gives consumers the same strong rights across the EU. It aligns and harmonises national consumer rules, for example on the information consumers need to be given before they purchase something, and their right to cancel online purchases, wherever they shop in the EU.

EU Price Regulation for cross-border payments
In 2001, Regulation (EC) No 2560/2001, followed in 2009 by Regulation (EC) No 924/2009, fixed uniform underlying conditions for processing cross-border payments in euro, and the fees for intra-EU cross-border payments in euro were aligned with those for domestic payments in euro.

SEPA End-Date Regulation
SEPA payment instruments replaced domestic A2A payment instrument formats for euro payments.

Card Interchange Fee Regulation (IFR)
The IFR caps interchange fees for payments with consumer cards, effective from 9 December 2015. It increases transparency on fees thus permitting retailers to know the level of fees paid when accepting cards.

Domestic bank service laws
Complementary to EC directives and EC regulations.

Characteristics of PSD2– Outlook: PSD3 and PSR

The adoption of PSD2 has formalised the relationship between banks and trusted payment providers (TPPs) by establishing the Open Banking Mandate, providing open access to customer account data and the payments infrastructure. This is expected to stimulate the FinTech market to develop new integrated service models for both consumer and business customers.

This regulation is a reaction to the growing demand from customers as mobile and internet applications have become widely adopted driving expectations in how services should be delivered across all industries. Other market segments have adopted Open Banking APIs to respond to this demand and have shown that innovative applications can grow business and change customer behaviour.

PSD2 has a significant impact on the European payments industry. According to the EC, the revised Payment Services Directive brings several new important elements and improvements to the EU payment market e.g.:

In 2022, the regulator started a PSD2 review process to review and update guidelines, which may end up in a revised PSD2 dubbed PSD3. While consultations are currently ongoing, the revisions are expected to address the achievements of the PSD2 and evaluate the need for a revised standard.

Iceland and PSD2 – Among others, Iceland transposed the EU Payment Services Directive (PSD) into law effective from January 2018. Icelandic banks have taken significant steps toward preparing for PSD2. In addition, the General Data Protection Regulation (GDPR), and the eIDAS regulation have significant impact on European digital payment services, including de-facto Iceland.

The PSD2 Directive was transposed into Icelandic law via amendments to the previously applicable Payment Services Act in November 2021, and was set to take effect in May 2022. The aim of the Act is to enhance competition and consumer protection in financial markets, as well as to support product development and innovation in the payment market. Only licensed entities within the European Economic Area (EEA and EFTA), such as Fintechs, qualify as providers of the new payment service. These entities are required to have a special operating licence or be registered with local financial supervisory authorities and must comply with stringent requirements set forth in the new Act.

As of Q1 2023, there were 85 trusted third-party Open Banking providers active in Iceland.

Proposed EC Revisions to the EU Payment Services Regulation – PSD3 and PSR 

In June 2023, the European Commission (EC) has published its proposed revisions to EU payment services legislation, as well as a proposal on Open Finance/data access in the financial services sector beyond Open Banking/payment accounts in the form of a new Open Finance framework called “FIDA”.

Essentially, the EC is proposing that PSD2 would be split into two different instruments. These will ensure consumers can continue to safely and securely make electronic payments and transactions in the EU, domestically or cross-border, in euro and non-euro. Whilst safeguarding their rights, it also aims to provide greater choice of payment service providers on the market:

Objective of the regulation is to enhance harmonisation of the rules and enforcement across the various EU Member States. In addition, the EC proposed to merge the E-Money Directive (EMD2) with the proposed PSD3 and PSR texts, so as to have one coherent regime for both payment services and e-money services, and thereby ensure a level-playing field between PIs and EMIs.

PSD3 also amends the Settlement Finality Directive (SFD) in order to allow non-bank PSPs (e.g. PIs and EMIs) to participate directly in SFD-designated payment systems. Fintechs will be given access to all EU payment systems, with appropriate safeguards, and giving them a right to have a bank account. That way, those non-bank PSPs would no longer need to rely on banks in order to execute payment transactions.

A system to check IBANs and a platform to enable payment service providers to share fraud-related information are two proposals around consumer protection, including an extension to all credit transfers of IBAN/name matching verification services. These have been proposed by the Commission for instant payments in Euro. All consumers should benefit from them, for both regular and instant credit transfers.

The European Banking Authority (EBA) is given once again a number of mandates under PSD3 and the PSR to prepare draft regulatory technical standards (RTS) and draft implementing technical standards (ITS), ultimately to be adopted by the EC, as well as guidelines, and to continue maintaining the register.

In 2024, significant progress was made in updating PSD2. In April 2024, the European Parliament adopted the European Commission’s proposals for PSD3 and PSR at first reading. While the exact timelines for enforcement are not yet confirmed, it is anticipated that the finalised versions of PSD3 and PSR may become available by early 2025 and the implementation is being targeted for mid-2027.

General Data Protection Regulation (GDPR) 

The General Data Protection Regulation (GDPR) is a legal framework that sets guidelines for the collection and processing of personal information from individuals who live in the European Union (EU). Since the Regulation applies regardless of where websites are based, it must be heeded by all sites that attract European visitors, even if they don’t specifically market goods or services to EU residents.

Adopted in April 2016, the Regulation came into full effect in May 2018, after a two-year transition period. The GDPR replaces the Data Protection Directive 95/46/EC and is designed to:

The GDPR mandates that EU visitors to all websites must be given a number of data disclosures. Sites must also take steps to facilitate such EU consumer rights as timely notification in the event of personal data being breached (breach notification). Among others, the GDPR mandates the user’s right to access its data and the right to be forgotten. In addition, the conditions for consent have been strengthened, and companies are no longer able to use long, illegible terms and conditions full of legalese. Also, it must be as easy to withdraw consent as it is to give it.

eIDAS Regulation and Digital ID Trends

The electronic Identification, Authentication and Trust Services regulation (eIDAS) is a set of EU standards and regulations for electronic identification and trust services for electronic transactions in the European Single Market. It was established in the EU Regulation as of 23 July 2014, relating to electronic identification, and repeals directive 1999/93/EC from December 1999. It entered into force on 17 September 2014 and applies from 1 July 2016 except for certain articles, listed under its article 52.

In June 2021, the European Commission proposed an update to eIDAS that will enable every European to have a set of digital identity credentials recognised anywhere in the EU. This will make cross-border electronic ID (eID) a reality where people can use a single ID across the EU. With eIDAS 2.0, by 2024, all EU member countries must make a single European digital identity wallet available to every citizen who wants one. Many digital ID schemes operate based on super-secure passwords and/or mobile apps confirmed by a second factor, either passwords or one-time token or biometric factors such as fingerprints.

Digital ID in Europe has been proliferating rapidly in recent years. To date, both the nature of these schemes and their application has varied widely – for example, BankIDs in the Nordics being used to support instant payments and the delivery of harmonised government services.

eID platform initiative – In May 2017, a group of European companies including banks, vehicle manufacturers, and technology providers signed a “corresponding declaration of intent” to establish a joint, pan-industry platform that will let their customers use a so-called “master key” for registration and identification when accessing online services across a range of sectors including government, aviation, and retail.

Biometric Authentication Services

As a form of digital identity, biometric factors have been gaining ground across Europe in recent years, especially since the EU mandated their use for national ID cards and passports from August 2021.

In the payments industry, European banks and other account servicing payment service providers (ASPSPs) have started to support new biometrics technology companies that will develop client identification and authentication systems. They will be dedicated to the research and development of software for the digital verification and authentication of personal identity, through facial, voice, image or document recognition, or fingerprint reading.

With the EU regulator’s decision to mandate Strong Customer Authentication (SCA) as part of the revised payment services directive, PSD2, biometric authentications look set to grow further in importance as part of the payments landscape.

Companies such as Sweden’s Fingerprints (for online payment ID) and the UK’s Fingopay (for physical payments) have pioneered their use in P2P and P2B transactions, while some national ID schemes such as BankID in the Nordics and nemID now include biometric factors alongside PIN in their log-in processes.

Mastercard Identity Check – In October 2016, Mastercard launched its biometric payment authentication service, Mastercard Identity Check in Germany and another 12 European countries. European consumers can now validate online purchases using 2-factor authentication such as one-time codes sent by SMS or fingerprints in their mobile app.

Among others, in 2024, payments-specific biometric initiatives and pilots in Europe include:

In September 2022, the Nordic-Baltic eID Project (NOBID) announced it was leading a consortium of 6 countries – Denmark, Germany, Iceland, Italy, Latvia and Norway – to deliver a cross-border payments pilot aligned with the aims of the European Commission’s EU digital identity wallet programme. The consortium’s proposal to be 1 of 4 EU digital identity wallet pilots focuses on payments. The EU digital identity wallet is a biometrically secured app that, when it comes into being, will allow citizens across the continent to easily verify their ID, access services and store sensitive digital documents.

NOBID’s proposal leverages existing payment infrastructure to enable payment issuance, instant payments, account-to-account transfers and payment acceptance both in-store and online. The project will be designed to complement wider EU plans to streamline cross-border payments such as the European Payments Initiative (EPI) and the Digital Euro. NOBID’s proposal is supported by financial services players including DSGV in Germany, DNB and BankID in Norway, NETS in Denmark, Intesa Sanpaolo, Pago and ABILab in Italy and Greiðsluveitan in Iceland.

Banking Sector

Since 1961, Sedlabanki Islands has been the national central bank of Iceland. The Act on Financial Undertakings No. 161/2002 is the basic legislation for financial operations in Iceland. Fjármálaeftirlitið is the Financial Supervisory Authority (FME) for all banking operations. Samkeppniseftirlitið is the Icelandic Competition Authority (ICA). The Financial Supervisory Authority and the Central Bank of Iceland merged at the beginning of 2020.

As a member of the EEA Agreement, the legal framework in which Icelandic financial institutions and companies operate is based on European Union directives. The EEA Agreement also makes the Icelandic financial system a part of the European Single Market area.

On 4th November 2014, the European Central Bank (ECB), via the Single Supervisory Mechanism (SSM), assumed the responsibility of supervising the financial stability of banks operating within the euro zone. However, while the ECB has final supervisory authority over all banks operating within the euro zone, it will only directly supervise those banks classified as ‘significant’ under the terms of the SSM. In September 2024, the ECB reported 113 significant banking institutions of the 21 participating EU member states which it would directly supervise. All ‘less significant’ banks in Iceland continue to be supervised by Sedlabanki Islands.

In 2008, the Icelandic banking sector experienced a severe crisis that resulted in the government taking control of the country’s three largest commercial banks (Kaupthing Bank, Landsbanki Íslands and Glitnir).

Following the financial collapse in October 2008, the commercial banks have been recapitalised by the Icelandic government. Despite the collapse, the banking system continued to operate, the payment system remained functioning, and customers could obtain all general banking services in bank branches.

However, the past few years have seen a strong upswing in Iceland following the recession that lasted from late 2008 through 2010. The GDP growth cycle reached its peak in 2016, at 7.4%. By 2018, growth picked up to 4.6% but declined to 1.9% in 2019. The economic impact of the COVID-19 pandemic resulted in GDP falling by 6.6%, significantly depressed by the drop in tourism, one of Iceland’s largest industries. By 2021, GDP recovered to grow by 4.4% and even sharper by 6.4% in 2022, driven by a sustained rebound of foreign tourism, strong domestic demand and exports. By 2023, GDP growth exceeded expectations at 4.1% due to increased services exports and higher domestic demand and trade.

Inflation averaged 8.3% in 2022, as compared with 4.4% in 2021. It sustained an uptrend throughout 2022 starting at 5.69% in January to a peak of 9.9% in July before tapering to 9.3% in September. At the end of the year, inflation closed at 9.6% in December. Inflation excluding housing measured 6.1% in 2022, and the spread between inflation including and excluding housing widened further over the course of the year. By 2023, annual inflation eased to 5.6% due to stable energy prices and monetary policy decisions.

Structure

As of 2023, the banking sector was dominated by 3 commercial banks, 1 investment bank and 5 savings banks offering a full range of financial services including regular lending, deposit and current account services. Also operating in Iceland are 4 credit institutions, 2 payment institution (Blikk and Straumur), 2 e-money institutions (Monerium and Rapyd), 8 securities companies and 11 insurance companies (life and non-life insurance) offering a wide range of financial services for homes and businesses.

Three of the 4 major banks are classified as systemically important and are subject to supervision by Iceland’s Financial Stability Council. Together, these 3 banks control approximately 96% of the loan market share in the banking sector.

In June 2014, the Financial Supervisory Authority approved the merger of Sparisjóður Bolungarvíkur and Sparisjóður Norðurlands, leaving a total of seven savings banks in operation. In 2015, FME decided on the merger of Landsbankinn and savings bank Sparisjóður Vestmannaeyja effective as of 29 March 2015.

By end-2023, the leading banks were the commercial banks Landsbankinn, Íslandsbanki and Arion Banki. Table 3 illustrates the ongoing bank branch consolidation indicating a clear move away from branches and towards the Internet. In February 2023, Kvika banki proposed a merger with Islandsbanki to create a strong financial institution with an optimal revenue combination and by May 2023, both banks announced that merger discussions are proceeding. In June 2023, the board of directors of Kvika announced that it had decided to discontinue the merger negotiations with Íslandsbanki.

In January 2020, the Iceland Central Bank and the Financial Supervisory Authority merged under the name of the central bank. Financial supervision is now the responsibility of the central bank, which will monitor supervised entities.

1 – Leading Banks in Iceland

[ninja_tables id=”4220″]

Note: Kvika Banki hf. was formerly MP Banki hf., changing its name in October 2015.
Source: PCM research.

2 – Financial Service Sectors in Iceland

[ninja_tables id=”4219″]

Note: some figures restated by the Central Bank.
Note: other credit institutions includes failed banks (‘bad banks’) from end-2015.
Note: total includes Central Bank assets, insurance companies and mutual fund, investment and institutional funds.
Source: Sedlabanki Islands.

Landsbankinn – is the leading Icelandic financial institution by total assets. The bank offers a full range of financial services and is the market leader in the Icelandic financial service sector, with 34 branches and 127,071 retail customers. Focused on commercial banking, Landsbankinn provides retail and corporate banking services, capital markets services, and asset and wealth management for private banking clients. Landsbankinn was established on 9 October 2008, but the history of its predecessor runs back to 1886. Landsbankinn is owned by the National Treasury of Iceland (98.2%). In 2023, 5,500 individuals joined Landsbankinn as customers and the bank claimed a 40.1% market share of retail customers, the highest share on record. Similarly, its corporate customer base grew by 1,1158 entities in 2023 (2022: 2,000) to 17,831.

In 2023, Landsbankinn launched its merchant acquiring service using RS2’s payments processing platform. RS2 is a leading provider of global omnichannel payment solutions for issuers and acquirers on a single payment platform. This solution will integrate POS network and payment gateways and will boost customer loyalty for merchants while allowing them to automate book-keeping systems.

On 15 September 2016, Landsbankinn acquired its own shares from shareholders in accordance with a buy-back programme during three specified acquisition periods and now owns 1.6% of total equity.

Arion Banki – is the second-largest Icelandic financial institution by total bank assets. It has 17 branches serving more than 100,000 customers in Iceland.

Arion Bank and Kaupthing announced on 19 March 2017 the results of a private placement of Kaupskil’s shares in Arion Bank, in which Kaupskil sold a 29% share in Arion Bank. After the sale Kaupskil held 57.9% of the issued share capital. In addition, the private placement agreements grant the investors options on 21.9% of the issued share capital in Arion Bank. Icelandic State Financial Investments (ISFI), which represents the government of Iceland’s holdings in financial institutions, continues to be the second largest shareholder with 13% of shares.

In February 2018, Kaupskil ehf. acquired the government’s 13% stake in Arion Bank for ISK 23.5 billion, and the state is therefore no longer a shareholder in Arion Bank. In July 2019, Kaupskil sold its entire 20% stake in Arion Bank to a group of international and domestic investors for ISK 27.4 billion. At the end of 2023, Arion Bank owned 0.95% of its own issued shares. The major investors in Arion Bank included Gildi Pension Fund (9.85%) and LSR Pension Fund (9.53%).

Arion Bank’s listing on Nasdaq Iceland and Nasdaq Stockholm took place on 15 June 2019 following an initial public offering of 28.7% of shares in the Bank, placed mostly with investors in Iceland, the United States, the United Kingdom, Scandinavia and Continental Europe. It was the first listing of an Icelandic bank on the main market in Iceland since 2008. During the year and prior to the IPO, Icelandic State Financial Investments (ISFI) sold its shareholding, and the Bank is now fully privately owned.

In June 2019, Arion Bank announced that it was exploring sale options for its payment solution and acquirer subsidiary Valitor. In July 2021, Israel-based and UK-based Rapyd entered into a definitive agreement with Arion Bank to acquire Valitor, for an estimated price of $100 million, subject to regulatory approval. The acquisition was completed in Q2 2022.

Due to the merger of Rapyd and Valitor, an agreement was made with the competition authority that 25% of the market share in the Icelandic payment processing market would be sold to a new company. The reason for that was to prevent the formation of a dominant party in the processing market in Iceland. Kvika bought this portfolio of contracts and subsequently founded the subsidiary Straumur.

Íslandsbanki, an Icelandic bank with roots tracing back to 1884, is the third largest Icelandic financial institution with a market share of 31% in retail banking, 30% in corporate and investment banking, and 38% in the credit card business. In 2023, it had 12 branches and around 40 ATMs serving more than 146,000 active customers in Iceland. In 2018, the Kreditkort brand was discontinued, and all of its customers were placed under Íslandsbanki.

Íslandsbanki is wholly owned by the Icelandic State Treasury, directly (100%) since January 2016. The shares are administered by the Icelandic State Financial Investments (ISFI – Bankasýsla ríkisins) on its behalf. At the end of January 2016, the Bank’s previous owner, Glitnir, signed a composition agreement to transfer its 95% share ownership in the bank to the Icelandic Government as part of a stability contribution. The change of control was approved by the competition authorities in March 2016 and the shares were transferred to the Icelandic State Treasury.

In July 2020, Íslandsbanki sold 63.5% of its holding in card issuer and acquirer Borgun to payment solution provider Salt Pay. Although the sale price was not disclosed, Íslandsbanki said the sale would have a positive impact on the bank’s capital ratios and liquidity ratios.

In June 2021, the Icelandic government sold a 35% stake (from a 100% stake in 2020) in Íslandsbanki in a public offering, with the bank’s shares admitted for trading on the Nasdaq Iceland stock exchange, and in 2022, the government further reduced its ownership stake to 42.5%. At year-end 2023, there were more than 11,500 (2022: 12,000) shareholders of the bank. The Icelandic government is the largest shareholder, representing 42.9% of the outstanding shares, and is followed by Pension funds and insurance companies with collective ownership of 36.7%. At the end of 2023, 89.4% of the bank’s shares were owned by domestic parties and 10.6% by international investors.

Kvika Banki – formerly MP Banki, changed its name in October 2015. As MP Banki, it has operated in Iceland as an investment bank (since 2003) and a commercial bank (since 2008). The bank had 2,876 (2022: 2,992) shareholders at year-end 2023, of which none held more than 10% of shares in the bank. The ownership of the bank is transparent, and it is the only bank that is fully owned by private entities, such as pension funds, companies, and individuals. The bank acquired GAMMA Asset Management in 2019. In March 2019, Kvika Banki was formally listed on the Nasdaq Iceland stock exchange.

In April 2020, Kvika announced its sale of its 41% shareholding in payment processor Korta to the UK-based FinTech company Rapyd. In November 2020 Kvika, TM, and Lykill approved the merger of the three companies, following the conclusion of mutual due diligence. Kvika acquired FinTech solutions provider Netgíró in January 2021. In 2023, Kvika proposed a merger with Islandsbanki and both banks have begun merger discussions. By June 2023, the board of directors of Kvika announced that it had decided to discontinue the merger negotiations with Íslandsbanki.

Similarly, Kvika is partnering with Enfuce in 2023 to modernise its payment services, launch the first-ever hybrid card (which combines debit and credit products on a digital card), integrate with Apple and Google Pay, and relaunch its Aur App (following its acquisition of the Fintech company, Aur, in 2021).

Due to the merger of Rapyd and Valitor, an agreement was made with the competition authority that 25% of the market share in the Icelandic payment processing market would be sold to a new company. The reason for that was to prevent the formation of a dominant party in the processing market in Iceland. Kvika bought this portfolio of contracts and subsequently founded the subsidiary Straumur.

Digital Challenger Banks 

Several digital challenger banks have entered Iceland, including N26, Revolut, and Wise. They already have a clear Open Banking strategy in place.

In parallel, many Icelandic banks co-operate and partner with trusted digital payment providers and FinTechs to prepare for the Open Banking ecosystem, enrich their digital banking services, and to offer additional mobile banking app features.

In April 2020, Icelandic challenger bank Indó announced its launch, offering a current account and debit card available through its mobile app. As of mid-2020, Indó was in the process of applying for a banking license from the Icelandic Financial Supervisory Authority. Indó claims that it does not charge fees on its accounts, only charging transaction fees. In February 2022, Indó officially launched after the close of a $4.5 million seed round and was concurrently granted a license by the Central Bank of Iceland to operate as a savings bank.

Although not a challenger bank, Icelandic personal financial management, and digital banking start-up Meniga now serves 100 million people in 30 countries, and 165 bank brands, including clients such as Santander, Nordea, and UniCredit. It offers Fintech services such as personal finance management, predictive analysis and targeted rewards. As of 2022, it powered 15 billion enriched transactions per annum and by 2024, Meniga claimed it processed more than 200 million transactions in real time daily. In December 2023, Meniga raised €15 million in Series D funding from some European banks with participation from several existing shareholders.

In November 2018, Íslandsbanki became the third bank in Europe to make an investment in Meniga, paying €3 million for a minority stake, bringing the total investment in the company from banks in 2019 to €9.1 million. The Icelandic bank followed Swedbank´s investment in April 2018 and a strategic partnership announced with UniCredit in June 2018.

In January 2019, Meniga acquired a Swedish rewards platform, Wrapp, in a bid to take on the likes of Google and Facebook in the European marketing arena. Previously, Meniga and Wrapp were independently offering transaction-driven rewards – the former in Iceland and the latter in Sweden and Finland. The merger will operate from Stockholm under the Meniga banner.

In March 2021, Íslandsbanki became the first Nordic bank to implement Carbon Insights, Meniga’s inaugural green banking product into its digital banking offering, offering users an estimate of their overall carbon footprint based on their spending profile, spending categories, and time periods. In the same month, Meniga closed a €10 million investment round to support its new range of green financial products.

As of mid-2021, Meniga joined the Visa Ready Programme, which provides a certification from the payment network that accords specific standards of security and functionality. Also, Meniga will become a listed entity on the Visa Partner Portal.

Digital Banking

According to Eurostat, 96% of all Icelandic bank clients were internet banking users by end-2023.

All Icelandic retail banks offer online banking services and mobile banking apps to their clients. Services available include balance and transaction reporting and payment initiation.

There is no bank-independent electronic banking standard in Iceland; each bank offers its own proprietary system for online banking purposes.

According to Arion Bank, strong digital distribution channels sustained full product offerings throughout 2020, and the transformation of branches to sales and service centres with a focus on providing customer service and advice with a full product suite is underway.

In 2022, Arion Banki reported more than 100,000 active app users with 70% of sales transactions conducted through digital channels. In 2021, Arion Bank launched SOPRA, a new deposits and payments system to create new opportunities for product development.

During 2023, Íslandsbanki reported that the number of active app users rose by 8.6% from 2022 to a record high of 114,000 (App visits amounted to 32.5million), while the number of service contacts totalled 52 million via the app, online bank, website, Fríða, branches, and advisory centres. 89% of the Bank’s key products were sold via digital channels. As of 2023, 83% of individual customers were active in digital channels and 88% of customers use contactless payment solutions to pay for goods and services.

During 2021 the bank also implemented its new core lending system to strengthen operations, link both customers and partners to new technologies, and help to expand the bank’s product range. In 2021, the bank continued working with open web services, opening a third-party development environment as per the PSD2.

Íslandsbanki was the first bank in Iceland to offer payments via Apple and Android smartphones and via smartwatches such as Garmin and Fitbit, and in 2020 became the first Icelandic bank to offer Fróði a chatbot available 24/7. The Chatbot covered almost half of the advisory centre chats (37,000) and resolves 95% in full in 2022. By 2023, 51% of advisory centre chats were serviced by chatbot.

In 2022, the Bank remained at the forefront of digital innovation by being the first bank in Iceland to introduce the Google Pay payment solution to its customers and offer digital authentication for ATM login. Similarly, Islandsbanki introduced Ávöxtun, the first fully digital deposit account. By 2023, most customers (around 88%) choose to buy goods and services with contactless payments, using solutions the Bank has introduced, such as Apple Pay, Google Pay, Garmin Pay and Fitbit Pay.

In 2023, Landsbankinn reported 150,000 app users, up 35.6% from 2022, with 19 updates to the App in 2023 and over 36.1 million logins to its app and online banking portal. In 2022, Landsbankinn reported a 35% increase in visits to its app.

In November 2021, following the implementation of the new PSD2-based Act on Payment Services, Landsbankinn opened a sandbox allowing Fintechs and other companies in the sector to develop Fintech solutions that link to the bank’s systems. As of 1 May 2022, Landsbankinn’s customers can choose to view their bank accounts in apps and websites external to the Bank and use these services to make transfers from their accounts.

Payment Services

In Iceland, the law on payment services has de-facto adopted the payment services directive (PSD) of the EU in December 2011 and the EU interchange fee regulation (IFR).

In 2024, the more than 300 different payment services offered in Europe can be grouped into:

Card Brands and Card Types

There is no domestic card scheme in Iceland. Visa and Mastercard are the principal payment card brands issued. In addition, a few American Express cards were in circulation. However, in 2017, American Express closed its card-issuing operations in Iceland.

Icelandic card products like consumer cards, commercial cards, and purchasing cards range from classic cards to gold cards and platinum cards. Additional card features (e.g. picture cards, bonus points, PIN selection at ATMs, cashback, card control by SMS notification, and geo-blocking) are used to attract cardholders. Also, individual picture cards and collector cards are issued on demand.

The EMV migration of cards is complete. All cards issued in Iceland are SEPA-compliant EMV chip cards.

From July 2023, banks and other card issuers will no longer issue Maestro cards. Instead, they will need to issue Debit Mastercard cards. Maestro was launched in 1991 and was the world’s first debit card that could be used via an online network. About 400 million Maestro cards are in circulation worldwide, mainly across Europe. However, Maestro is not enabled for the demands of e-commerce and cannot be used for online or in-app payments, hence the decision to phase it out in favour of Mastercard Debit products. Visa announced that Electron cards will be phased out globally in 2024. The features of the Visa Debit card have been modified to match the features of the Visa Electron card.

Debit cards issued are Debit Mastercard, VISA Debit, and Maestro cards. There are no V PAY cards in the issue.

Credit Cards issued are cards branded VISA, Mastercard. There are no American Express cards, Diners Club cards, and no JCB cards in issue.

Prepaid Cards – Valitor is the leading VISA prepaid card issuer in Iceland. In September 2014, Prepaid Financial Services (PFS) announced the launch of the iKort Prepaid Mastercard card. It was the first prepaid Mastercard in ISK denomination issued in Iceland. The iKort card is not connected to a bank account. Since then, Arion Bank has launched a prepaid Visa-branded travel card and Paysafecard has launched a prepaid solution in partnership with Basko verslanir.

Co-branded cards – In Iceland, few co-branded card products are in circulation. Co-branded cards are usually based on the international card brands Mastercard, VISA or American Express.

Kreditkort issued an American Express card with co-brand partner Icelandair. Effective 2018, all Kreditkort cards have been rebranded as Islandsbanki cards.

Contactless Cards and form-factors

From May 2013, Valitor issued prepaid VISA cards with added contactless payWave function. From November 2014, Íslansbanki issued contactless Mastercard cards with contactless PayPass function. From 2016, all Icelandic banks have issued contactless cards. From 2019, Icelandic banks had rolled out contactless payments through Apple Pay, Garmin Pay and Fitbit Pay.

In November 2021, public transit service Strætó implemented the KLAPP contactless payment system called KLAPP, allowing users to pay their fares via scanners placed on the buses. Upon boarding, commuters scan a code using the KLAPP card, app, or 10-fare paper pass to pay their fare. The app is available for download for both Apple and Android devices.

Predefined contactless limits – Contactless payments of purchase amounts below a predefined contactless limit are without PIN or signature and without transaction receipt. In Iceland, the contactless limit for payments without PIN/signature was initially set at ISK 5,000 for cards with PayPass or payWave function (only Íslandsbanki POS terminals have a lower limit of ISK 4,200).

As of April 2020, in response to the COVID-19 pandemic, Iceland joined other countries in raising the contactless limit to ISK 7,500 to facilitate more cashless transactions.

Interchange Fee Arrangements

International and Intra European Non-EEA Interchange Fees are set by the members of the international card schemes to be applied in case of cross-border transactions or foreign cards used in Iceland, respectively. The effective rates of Mastercard and VISA Europe can be found on the respective Mastercard and VISA websites.

In Iceland, domestic Merchant Interchange Fee (DMIF) rates for Icelandic cards are defined by Mastercard and VISA, respectively.

The interchange fee regulation 2015/751/EU is adopted for Icelandic debit card business. The interchange fees for domestic card-based payment transactions on consumer cards are capped as follows:

However, there are some variations depending on the card type and transaction nature:

Consumer cards:

Commercial cards:

Interregional transactions (between Iceland and non-EEA countries):

Specific card schemes:

Debit card interchange fees in Iceland are higher compared to many European countries. For domestic transactions within Iceland, the interchange fee for debit cards is as above. However, for cross-border transactions, the fees are significantly higher.

When Icelandic debit cards are used abroad, the cost per transaction averages 118 kr (Icelandic krona), which is approximately $0.85 or €0.798. This is nearly 6 times higher than the cost of using a domestic debit card within Iceland, which averages 20 kr per transaction.

It’s important to note that Iceland, while part of the European Economic Area (EEA), is not subject to the same interchange fee caps as EU countries. For transactions where either the card issuer or the merchant is located in the EEA (including Iceland), the interchange fee for debit cards is capped at 1.15%. However, domestic transactions within Iceland may have different rates.

Visa’s interchange fees for Iceland, as of April 2024, vary depending on the type of transaction and card. For example, Visa Fleet acquirers may receive an additional interchange incentive of 0.30% if they submit the transaction with additional Level 2 and Level 3 data.

Merchants in Iceland have seen a significant increase in fees paid to payment service providers, with a 23.5% rise in real terms between 2021 and 2022. This increase is primarily due to growth in credit card turnover and an increase in the number of foreign payment card transactions

American Express – As a result of the EU regulation of interchange fees (IFR), American Express elected to exit all of its bank licensing arrangements in the European Union. This means that they have terminated all licenses with its existing EU partners, stopped issuing new cards and are in the final stages of the process of closing down all operations directly related to bank licensing. Over the course of 2019, American Express credit cards issued under independent operator agreements were rendered invalid in all countries of the European Union. Various banks that have up to now had exclusive licensing contracts with American Express have already responded accordingly and provided their clients with the opportunity to switch to other card brands.

From 2020, American Express Payments Europe is now the sole issuer and acquirer of American Express cards in Europe, including Iceland. However, American Express Payments Europe continues its local sales partner arrangements with local acquirers enabling the use of American Express cards at ATMs and POS terminals.

E-Money 

In Iceland, the law on e-money services has adopted the e-money directive of the EU (EMD).

In 2023, there were 2 e-money institutions resident in Iceland. Authorised in another EEA member state, a total of 87 cross-border e-money institutions provided notification of operating in Iceland under the EU passport system. Most of them come from the UK.

On June 14, 2019, Monerium announced that it had received regulatory approval to provide fiat payment services on a blockchain and use the Icelandic Kronor as e-money throughout the European Economic Area. This is the first time that electronic money has been approved for use over a blockchain. The ConsenSys-backed Monerium initially operated using the ethereum blockchain – though it is prepared to operate across public and private distributed ledgers, allowing expenditures and transfers to be made without an intermediary.

In January 2020, Monerium announced the successful passporting of its e-money license to all 28 EU member states, Iceland, Norway and Liechtenstein. The pan-European license allows Monerium to support all European customers with digital cash on the Ethereum blockchain. In the same month, Monerium and Algorand entered a partnership to issue e-money on the Algorand protocol. Algorand is an open source, permissionless, pure proof-of-stake blockchain protocol.

Prepaid products – paysafecard (A) is active in Iceland and launched its prepaid product, paysafecard.

Digital Account-to-Account Payment Services 

In the Yearbooks, account-based payment services are classified as IBAN-based payment services in SCT/SDD format offered by banks or by independent payment initiation service providers (PISP).

Iceland is part of the SEPA initiative for €-denominated retail payments. All commercial banks in Iceland are indirect members of the SEPA Credit Transfer Scheme (SCT) and can send and receive payment orders according to the SCT standards. Also, the Icelandic financial institutions offer SEPA direct debit services (SDD) from 2015.

All credit transfers are electronic and can be made online, by telephone banking and by ATM fund transfers. In Iceland, credit transfers are used for both high-value corporate and low-value retail transactions.

Direct debits are used in Iceland for low-value recurring payments such as utility bills. Although Iceland is not an EU member, the Icelandic financial institutions offer SEPA SDD services, since 2014.

Instant payments (SCTINST) is the IBAN-based immediate payment scheme in Europe, officially launched in November 2017. It makes funds immediately available to the beneficiary – compliant with existing SCT infrastructure. The regulators will require all banks to offer Instant Payments from 2018.

Among others, the characteristics of SCTINST include an initial maximum of €15,000 with the funds made available on the beneficiary’s account in less than ten seconds, 24/7/365 real-time processing, and immediate refunds in the case that the SCTINST payment was not successful. From July 2020, the maximum amount for instant payments is €100,000.

Chaired by the ECB, in 2014, the Euro Retail Payments Board (ERPB) identified the need for a pan-European instant euro payment solution. In April 2016, EBA Clearing started the SCTINST project with more than 40 large European banks involved. In November 2016, the European Payments Council (EPC) published the SCTINST scheme and SCTINST rule books version 1.0 while the ERPB provided the governance model. In November 2017, EBA Clearing completed the pan-European instant payments infrastructure, RT1.

SEPA credit transfers and direct debits can be settled on a same-day or next-day basis. In 2023, about 50% of all IBAN-based payments in Europe were processed intra-day, or even immediately inside of the same bank group. Potential first use cases for SCTINST in Iceland may include P2P, mobile banking apps, online payments, and B2B.

As of May 2024, 2,295 banks from 36 European countries had registered for the SCTINST scheme. This represents 63% of all SCT scheme participants.

As in many European countries, bank transfers have been adopted for online payments, enabling consumers to pay directly from their bank account as an alternative service to payment cards.

In Q1 2023, FME did report 1 PISP licensed in Iceland. Authorised in another EEA member state, 85 cross-border PISPs have provided notification of operating in Iceland under the EU passport system.

Advanced Payment Services

In the Yearbooks, advanced payment services are classified as online wallets, e-wallets, and/or mobile wallets with any type of payment service chosen by the wallet user to complete the payment.

In selected online shops resident in Iceland, the wallets PayPal and Skrill are offered as payment means.

PayPal – PayPal is available in Iceland. As of end-2023, PayPal reported more than 431 million active customer accounts globally, down 0.91% from 435 million in 2022.  During 2022, PayPal added approximately 8.6 million net new active accounts, ending the year with 435 million active consumer and merchant accounts. PayPal’s total payment volume increased to $1.52 trillion (up 11.6% from 2022) and customer engagement grew to an average of 58 transactions per active account, driving 13% growth in transactions per active account at the end of 2023.

During 2020, with consumers worldwide embracing digital wallet capabilities, the company launched several related services including QR Code Checkout, Buy Now Pay Later, Crypto purchasing, and Xoom direct transfers to bank accounts and debit cards.

In June 2018, PayPal continued its shopping spree with a $400 million cash deal to acquire e-commerce platform Hyperwallet. The acquisition followed deals to buy Venmo, Xoom, Sweden’s iZettle (renamed Zettle) for $2.2 billion and AI-based merchant marketing outfit Jetlore, as Paypal bids to extend its reach to all corners of the payments market.

In May 2022, PayPal Ventures invested in Modulr, an embedded payments platform for digital businesses, as part of a $108 million Series C funding round led by General Atlantic, Blenheim Chalcot, Frog Capital, and Highland Europe. Modulr delivers payments infrastructure for over 200 top-tier customers, including Revolut, Wagestream, Sage and BrightPay, and processes an annualised transaction value of more than £100 billion. In 2023, PayPal is exploring the sale of Xoom, its international money transfer subsidiary, in a bid to cut cost and focus on high-growth business areas.

In 2023, PayPal is exploring the sale of Xoom, its international money transfer subsidiary, in a bid to cut costs and focus on high-growth business areas. Also, Stax Payments – an all-in-one payment provider for businesses – announced its partnership with PayPal in July 2023. This partnership will allow PayPal’s users to easily make payments with more than 20,000 merchants of Stax through a fast checkout process as well as new payment options such as Buy-now-pay-later solutions.

In 2023, PayPal launched its own US Dollar denominated stablecoin, PayPal USD (PYUSD), which is fully backed by US dollar deposits, short-term US treasuries, and similar cash equivalents and designed for digital payments and Web3. Eligible US PayPal customers who purchase PayPal USD will be able to transfer the token to external wallets, send person-to-person payments, fund purchases at checkouts supported by PayPal, and convert cryptocurrency holdings to and from PayPal USD.

In January 2024, PayPal launched AI-powered features to drive personalised offerings for both merchants and customers based on the data it possesses. These features include Smart Receipts (for merchants) which predicts what shoppers may want to buy next from the merchant. The merchant can then offer personalised recommendations, and cashback offers on this receipt. A major feature for users is CashPass which will use give users personalized cashback offers based on an AI analysis of their spending activity.

In March 2024, PayPal launched a complete suite of payment processing tools for online small businesses in the UK, Canada, and across more than 20 European markets. The PayPal Complete Payments package enables small businesses to accept an expanded range of payment instruments including PayPal, buy now pay later, Apple Pay, Google Pay, credit and debit cards, and alternative payment methods from around the world. By April 2024, PayPal added new features to its complete payments solution for small businesses to enable small businesses to accept a range of payments including PayPal, Venmo and PayPal Pay Later products. PayPal also gave small businesses access to four new features to help them drive payment acceptance and enhance how they run their business, and this will include Apple Pay as a checkout option.

Digital Payment Services

In the Yearbooks, digital payment services are classified as card-based payment services using EMV tokenisation security on the internet combined with HCE NFC technology in the case of contactless payments at POS terminals.

As of mid-2024, the Click to Pay online payment checkout service was available, replacing the previous MasterPass and VISA Checkout services respectively. Click to Pay is a joint service between Mastercard, Visa, Discover and American Express, enabling consumers to make secure 1-click payments without having to enter card details or passwords online.

Contactless payments on cards using Apple Pay, Samsung Pay or Google Pay made by foreign users at contactless POS terminals in Iceland are processed as payments on contactless cards.

Global contactless transaction values will reach $10 trillion by 2027, up from $4.6 trillion in 2022, with contactless mobile and wearable payments expected to grow by 221% and contactless card payments by 119% over the same period.

Contactless ticketing spend will increase by more than 440% globally between 2022 and 2027, with growing prominence and support for OEM pay solutions, such as Apple Pay, Google Pay and Samsung Pay being a key enabler for mobile NFC ticketing across many markets.

Overall growth in contactless transaction values will be catalysed by growing mobile payments adoption, with 99% of all smartphones capable of making contactless payments by 2027, up from 94% today, and average transaction values for Apple Pay reaching $28.20 and $33.40 for Google Pay.

Apple Pay has become one of the world’s most used digital payment methods. Its user base increased from 535.8 million to 550 million in 2023.

According to Apple’s Q2 last 2022, they saw a record of transactions with more than 1.8 billion processed during the quarter, up 40% year-over-year. This payment method is also available in over 90% of the US and 60% of stores globally.

Apple Pay is the #1 most popular digital wallet with a 92% market share, processing a global total of $6 trillion in payments in 2022 and produced a revenue of $1.9 billion.

As of 2023, Apple Pay processed 14.2% of all online consumer payments and 3.5% of all in-store purchases.

Around 51% of global iPhone users have enabled Apple Pay in 2022. There are 10 million Apple Pay-friendly contactless payment terminals worldwide.

The transactions made using Apple Pay are mostly in-store purchases, online transactions, and peer-to-peer payments. It is trendy for contactless payments, especially during the COVID-19 pandemic.

In 2024, an estimated 60.2 million Apple Pay users in the United States; projections indicate that over 75 million consumers will use Apple Pay by 2030. Putting it all together, Apple Pay is increasingly becoming an effective customer acquisition and retention feature for Apple. In June 2022, Apple Pay added Apple Pay Later, its buy-now-pay-later service, allowing users to split purchases into four equal instalments with no interest or fees. Initially launched in the US, the service is expected to roll out to other countries during 2023. In 2023, Apple launched its Card savings account from Goldman Sachs with a 4.15% annual percentage yield. Apple Wallet users can set up and manage a savings account directly from Apple Card in Wallet, with no fees, no minimum deposits, and no minimum balance requirements.

Apple Pay is available in Iceland and is supported by 24 banks and payment providers as of 2024.

Google Pay has 150 million users across 42 global markets.

In January 2022, it was reported that the company was planning to transform Google Pay into a “comprehensive digital wallet”, following the app’s reported slow growth and the shutdown of Plex. In April, it was reported that Google was planning to revive the “Google Wallet” branding in a new app or interface and integrated it with Google Pay. Google officially announced Google Wallet on May 11, 2022, at the 2022 Google I/O keynote. The app began rolling out on Android smartphones on July 18, replacing the 2018 app and co-existing with the 2020 Google Pay app in the US. While the app name itself was changed from Google Pay to Google Wallet, the service name of actually paying for things online or in-store remains as “Google Pay.”

In the US, Google Pay has over 25.2 million users.  Also, Google Pay is used on nearly 800,000 websites as a secure payment gateway. Roughly 20% of all mobile purchases are made using this digital payment processor.

Google Pay is available in Iceland and is supported by 21 banks and payment providers as of 2024.

Samsung Pay is available in 29 countries worldwide and has an estimated 140 million users. Samsung Pay works with Galaxy phones, including the latest Galaxy S22. Samsung claims that its system will work with almost all point-of-sale systems: NFC, magnetic stripe, and EMV (Europay, MasterCard, and Visa) terminals for chip-based cards.

In May 2020, Samsung Pay unveiled Samsung Money by SoFi, a mobile-first money management experience that makes available a cash management account and accompanying Mastercard debit card via the Samsung Pay app, in partnership with fintech company SoFi.

In June 2022, Samsung Pay was renamed to Samsung Wallet in the US, UK, France, Germany, Italy, and Spain. Along with the renaming came new features such as the ability to store digital assets, and digital keys within the Wallet app.

Samsung Pay is not yet available in Iceland.

Overview of Cashless Payments

Card use in Iceland is the highest in the world, reflecting the extension of card payments into new areas like bill payments, public conveniences, recurring payments, and business payments.

Card payments dominate cashless payments. Domestic credit transfers and direct debits are not in use.

Cheque usage in Iceland has significantly declined due to the increasing preference for electronic payments for both high-value and low-value transactions. All cheques are truncated into electronic items before being processed by the netting system. Settlement is on a same-day or next-day basis.

According to the central bank, as of 2020, over half of Icelandic households said they do not use cash at all. Of the more than 40% who do, they did not necessarily use cash to pay for goods and services; instead, they were more inclined to use cash as gifts or as person-to-person payments. When households buy goods and services, they use electronic payment solutions in 90% of cases.

Of that total, over 31% use card-based payment apps on their smart devices, and 10% use cash. In a comparable survey from December 2018, electronic payment solutions were used in physical trade in 87% of cases, and 13% of all payments were made in cash. Use of cash has therefore declined by three percentage points in two years. Cash payments accounted for an estimated 8% of the total transaction value in physical trade in 2020, down from 9% in 2018, while payment cards accounted for around 90%, including slightly more than 17% via smart devices.

Exchange Rates

The krønur (ISK) had been relatively stable for many years until mid-2008 when it lost a third of its value in a matter of days during the banking crisis of October 2008, declining to averaging €1: ISK 172.67 for 2009. Since 2010, the ISK has recovered up to €1: ISK 162.381 for 2013. From 2016, there was a 10.0% recovery to ISK 120.54 in 2017. By 2023, the rate was ISK 149.130.

3 – Average Exchange Rates

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Source: Sedlabanki Islands.

Market Infrastructure

A banking or credit undertaking operating licence is needed to issue cards or to offer acquirer services in Iceland.

According to Sedlabanki Islands, the payment systems in Iceland are aligned with the requirements of SEPA and with EU competition law, which has led to a restructuring of card acceptance arrangements and interbank ownership models in Iceland, since 2007.

Sedlabanki Islands manages all interbank payments in the country. Despite the small population, it processes a quite significant daily volume of transactions: up to one million payments with a peak of 160,000 per hour.

In April 2017, Sedlabanki Islands, the central bank, selected the Italian processor SIA to implement and support the new real-time gross settlement system (RTGS) and the new instant payment platform for Iceland.

Initially planned for go-live in 2018, SIA subsidiary Perago (RSA) was set to replace the Icelandic mainframe-based real-time solutions for high and low-value payment systems, which have been operating since 2001. SIA and Perago provide integration among Perago’s RTGS, Instant Payment and Payhub solutions.

The new processing model is based on a single system, which processes each type of payment (Bank to Bank, P2P or B2B) in a different way, while ensuring that all transactions can be exchanged using a single domestic message standard. The new RTGS was implemented in November 2020. Sedlabanki Islands processes around 1 million payments per day, and 160,000 per hour. The new SIA RTGS system manages up to 5 million payments per day.

P27 – Iceland is a member of the P27 payments project, which aims to establish the first integrated region for domestic and cross-border payments across multiple currencies in the Nordics and Scandinavian regions. P27 is an initiative from Danske Bank, Nordea, Swedbank, Handelsbanken, SEB and OP to serve the region’s 27 million people, creating the world’s first integrated domestic and cross-border real-time payments platform, a vital step for trade between Nordic countries.

In February 2018, the major Swedish, Danish, Norwegian, and Finnish banks banded together to explore the possibility of establishing a pan-Nordic payment infrastructure supplemented by common products, with the aim of making it possible to clear immediate payments and settle accounts within seconds, regardless of currency. The P27 project – so-called for the 27 million people who live in Sweden, Norway, Denmark, and Finland – will build on the success of the mobile bank payment apps of the Nordic banks like Swish in Sweden, Norway’s Vipps, and MobilePay in Denmark.

The collaboration reflects an effort to stay ahead of global technology giants like Apple and Samsung as customers no longer rely exclusively on their banks for financial services. The difference between P27 and the payment apps Nordic banks already offer is the cross-border nature of the project.

To facilitate this, P27 acquired the Swedish clearing house Bankgirot in October 2020. Bankgirot manages transactions of a total value of approximately SEK 73 billion per day. In July 2021, P27 Nordic Payments secured merger approval from the EU Commission to establish its pan-Nordic payments platform.

In June 2022, P27 announced that 13 banks connected to Swedish mobile payments system Swish were set to test on P27 by the end of 2022. Banks connected to Swish, which is used by more than 90% of the Swedish population, are at the front of P27’s drive toward processing the platform’s first transactions. The timeline called for SEK instant preparations to be finalised during H2 2022, followed by SEK batch preparations that were to be finalised in early 2023.

However, in April 2023, P27 announced the withdrawal of its clearing license from the Swedish Financial Supervisory Authority (Finnsinspektionen) as a result of new requirements and regulations that have challenged its operating model. While this reflects the continuously evolving landscape for payment infrastructure, it poses a major setback to the ambitious vision.

Greiðsluveitan

The core payment infrastructure in Iceland is highly centralised and is linked to the activities of the new Greiðsluveitan (formerly FGM), since 2011.

Domestic card payments are processed through the RÁS payment card authorisation system operated by Greiðsluveitan. All other card payments can be cleared through correspondent banking networks.

On 30 April 2010, the Icelandic banks and Sedlabanki decided to change the collaboration agreement on payment intermediation and IT which had been sound and economical and proved its value during the crisis. Implementation of the new agreement was approved by the financial supervisory authority (FME) and was carried out in 2011:

The objective of the takeover of the enriched FGM by Sedlabanki is to separate the ownership and management of important core infrastructures from users in a comparative market. The core infrastructure in question includes the Icelandic RTGS system, the FMG netting system, RAS system, payment card authorisation system, payable tools and Birtingur, and SWIFT.

Once owned by the payment systems, commercial banks and Sedlabanki, FGM had in the past taken over some the national EFTPOS service previously operated by VISA Iceland/Greidslumidlun, which also provided services for Europay, now Mastercard.

In February 2018, Iceland’s digital document delivery service, ebpSource, announced that Greiðsluveitan was regularly delivering documents on behalf of more than 3,000 connected organisations. Accessible through all of the country’s online banking networks, the platform delivers hundreds of millions of financial, government, utility and other digital documents, to a population of 340,000. The Greiðsluveitan service which was first launched in the early 2000s (at that time the service was owned jointly by the Icelandic banks) has grown to become a secure and trusted hub for document delivery.

Key to the platform’s development has been a strong working partnership between Greiðsluveitan, the ebpSource team and ebpSource’s local IT partner Origo. More than 2 million new e-documents a month are delivered into the service, with a historical archive of many years’ worth of digital documents accessible online. All manner of utility bills, bank and credit card statements, telecoms bills, salary slips, business invoices, passwords, local council notices, service charges and most other financially-related documents are routinely delivered through the service, with the advantages of immediate, single point access – anywhere, anytime.

The platform provides a mass of content to the nation’s online banking applications, a service differentiator for the banks themselves and a secure and efficient location for consumers and businesses to access a broad range of document content, according to the press release. In a geographically extensive and sparsely populated country, organisations can disseminate time-critical documents with speed and accuracy.

Transformation of Icelandic Interbank Organisations 

The Icelandic card business was developed in the 1980s by VISA Iceland, the original acquiring and licensing company, with Eurocard Iceland following. In line with developments in the rest of Europe, both were rebranded. Up to 2002, Greidslumidlun and Kreditkort provided almost all the multi-brand acquiring services available to Icelandic merchants.

In November 2002, PBS International (see Denmark profile) began to offer competitive acquiring services with an Icelandic partner, KORTA PAY, taking responsibility for contracting with merchants and transmitting records. Between 2002 and 2006, according to an investigation by the Icelandic competition authorities, Greidslumidlun and Kreditkort attempted to drive PBS International out of Iceland (see Appendix).

In late 2007, VISA Iceland/Greidslumidlun became Valitor. Eurocard/Europay Iceland originally was rebranded as Kreditkort and provided acquiring services to merchants and issuing processing services to debit and credit card issuers. In early 2008, the acquiring business was reorganised as Borgun, with Kreditkort retaining responsibility for issuer services.

Ownership of Valitor, Kreditkort and Borgun has moved on from the interbank association model, where the major banks were owners and members of both associations. From mid-2007, KreditKort (55%) and Borgun (63.5%) were majority-owned by Íslandsbanki, while Arion Banki is the dominant player in Valitor.

In October 2011, Íslandsbanki acquired another 45% stake in Kreditkort and became the 100% owner of Kreditkort, rebranding it as Íslandsbanki in 2018. In November 2014, Landsbankinn sold its entire share in Borgun and Valitor; and Arion Banki acquired an additional 38% share in Valitor taking its total share to 98.78%.

In July 2020, Íslandsbanki sold 63.5% of its holding in Borgun to Salt Pay, a European FinTech solution provider, which subsequently increased its stake in Borgun to 95.9%. In 2023, Salt Pay rebranded to become ‘Teya’, affirming the comprehensiveness of its business solutions beyond payments services.

Rapyd completed the 100% acquisition of Korta Pay in July 2020. In July 2021, Rapyd entered into a definitive agreement with Arion Bank to acquire Valitor, for an estimated price of $100 million, subject to regulatory approval. In July 2021, Israel-based and UK-based Rapyd entered into a definitive agreement with Arion Bank to acquire Valitor, for an estimated price of $100 million, subject to regulatory approval.  The acquisition was completed in 2022 following regulatory approvals.

By leveraging Rapyd’s collect, disburse, wallet and issuing capabilities, Valitor businesses and merchants can expand into a broad set of new use cases and services and quickly enter new markets.

Card Issuers – Overview 

Icelandic banks issue credit cards, charge cards, debit cards and prepaid cards in combination with bank accounts. Addressing the specific needs of personal banking and business banking, the card portfolio is composed of consumer cards, business cards and corporate cards.

Dedicated card products are offered for the individual client segments: families, millennials, students, affluent clients, small business clients, corporate clients and even basic account clients. The credit cards offered range from classic cards to gold cards and platinum cards.

The commercial banks and savings banks issue debit cards branded Debit Mastercard, VISA Debit, or Maestro, delayed debit/credit cards branded Mastercard or VISA, and prepaid cards and virtual cards for internet use. Since April 2008, Landsbankinn through Kreditkort had issued American Express cards, though these were discontinued in 2017.

The major issuers are Islandsbanki, Arion Banki and Landsbankinn. Valitor claimed to be the second largest VISA prepaid card issuer in Europe and operates more than 50 European prepaid programmes. Table 4 illustrates the card brands issued by the leading Icelandic banks as of mid-2024.

4 – Issuer Banks in Iceland

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Note: in 2018, Kreditkort became rebranded as Islandsbanki.
Source: PCM research

Outlook – By mid-2024, Icelandic card issuers face the following notable challenges:

Card Processors and PSPs

In Europe, the payment processing industry is composed of card processors, ATM/POS network hub processors, e-/m-payment service processors (PSPs), and specialised processors (e.g. CSM processors, TSM services).

In Romania, card issuer processing services range from technical issuer processing, including card printing, to full cardholder processing services. They include all types of cards and card technologies allowing for card use in multi-channels (i.e. at ATMs, POS terminals, on the internet and in-store mobile payments in the future).

Acquirer processing services in the country range from technical acquirer processing, including POS terminal services, to full merchant processing services. Usually, ATM/POS network processing is part of acquirer processing while payments on the internet are routed by specialised e-/m-payment service processors (PSPs) to the card acquirers and independent payment service providers (e.g. FinTechs like PayPal), respectively.

In Iceland, Borgun and Valitor are the leading card processors and PSPs. Also, Valitor is a prepaid card issuer processor servicing the prepaid programmes of 50 European clients. A new player in Iceland is the issuer and processor Enfuce.

Enfuce and Kvika Bank – Finland-based Enfuce, a card issuance and payment processing company, announced a new partnership with Orka Ventures, the Nordic-Czech Fintech holding company, to launch Orka Card, a new consumer lending card and mobile app that challenges the traditional understanding of ‘Buy Now Pay Later’ (BNPL) lending.

Since launching in 2016, Enfuce has processed nearly €2 billion card payments annually for more than 16 million active debit cards, credit cards and prepaid card users on its platform.

In November 2022, Síminn Pay, the Fintech subsidiary of Iceland’s largest telco provider, Síminn, partnered with Enfuce to launch virtual credit cards tailored for Síminn Pay’s lifestyle app, enabling users to make card payments.

In 2023, building on the burgeoning Card-as-a-Service (CaaS) trend, Enfuce has been chosen by Kvika Bank to modernise Kvika’s payment services.

Online Payment Service Processors (PSPs) 

Online payment service processors (PSPs) are specialised technical processors for all kind of secure online payments and mobile payments. Some of them also offer virtual PSP platform services (VPSP) for bank acquirers who want to take advantage of a kind of ‘internet network processor’.

Online shops of merchants are directly connected by an API interface or a hosted payment page either to the internet payment gateway of a bank acquirer, or they are connected to multi-acquirers through a PSP.

PSPs usually partner with more than one card acquirer and payment initiation service providers. Core services offered by PSPs may include payment gateways to card acquirers and other online payment service providers, online payment processing, risk management services, and collection services for merchants.

Security technologies applied to ensure secure online card payments include EMV tokenisation and strong 3D-Secure (MCSC, VbV, SafeKey) combined with one-time tokens. For card-less payment services, the security technologies applied include userID/password combined with one-time tokens and online banking access with one-time TAN.

In Iceland, Borgun and Rapyd are the leading PSPs. Other Icelandic PSPs include DalPay. In 2014, Valitor acquired a Danish PSP, AltaPay, to support its growth in e-commerce in the Nordic region. In 2020, Rapyd acquired Korta Pay, and it completed the acquisition of Valitor in 2022.

In 2012, Snorrason acquired CCNow, the online retailer and provider of online checkout services, from Digital River. In October 2014, Snorrason Holding, which owns the e-payment service providers DalPay (ISL), CCNow and MountPay, acquired the Icelandic merchant portfolio of Handpoint, the Icelandic MPOS terminal provider.

Acquiring and Acceptance

In Europe, most acquirers offer multi-channel card acceptance and value-added merchant services at POS terminals, mobile MPOS terminals and online shops. The leading acquirers usually act on a European level and offer their services cross-border.

Additionally, innovative acquirers also offer the acceptance of card-less payment services based on partner agreements with the issuer of those payment services (e.g. account-based payments, wallets, prepaid products).

Most acquirers either operate their own acquirer systems and ATM/POS/MPOS network service hubs, or they use the processing services of external processors. In order to service online merchants in Europe, they may operate their own PSP processing platforms or they co-operate with one or more specialised online payment service processors (PSPs).

From 2009, European acquirers compete in their home markets, cross-border on a European level, and cross-channel at POS terminals and servicing online merchants. From 2016, innovative acquirers started to offer omni-channel and multi-payment acceptance.

By mid-2024, omni-channel acceptance includes the ability to service all channels (i.e. POS/MPOS terminals, mobile in-store, online shops, in-app), and to accept multiple payment means in all of these channels. Multi-payment services demanded by merchants include cards, IBAN-based payments (SCT, SDD), online wallets, digital wallets, prepaid products, and immediate payments.

Outlook – By mid-2024, Icelandic acquirers face the following notable challenges:

In Iceland, Borgun and Rapyd are the leading acquirers. Other major acquirers include cross-border acquirer Teller (NETS Group), the largest acquirer of international payment cards in the Nordic region active in Iceland through a local partner. In 2023, Landsbankinn launched its merchant acquiring service using RS2’s payments processing platform. Table 5 illustrates the card brands accepted by the Icelandic acquirers as of mid-2024.

5 – Acquirers in Iceland

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Note: In 2022, Valitor absorbed Korta Pay.
Source: PCM research

Borgun, which until July 2020 was 63.5%-owned by Íslandsbanki, provides domestic merchants with acquiring services for Mastercard, Maestro, VISA, VISA Electron, American Express, Diners, Discover, JCB, and UnionPay cards. Also, Borgun supports domestic issuers of Mastercard and Maestro cards with processing services. Borgun is a licensed financial institution regulated by the Financial Supervisory Authority in Iceland, and it acts as cross-border acquirer for online merchants in Europe and for face-to-face merchants in the UK, Czechia and Hungary. In July 2019, Borgun signed an agreement with TruNarrative to automate its merchant onboarding processes, with the ambition of scaling the business outside Iceland in the years ahead. In July 2020, Íslandsbanki sold 63.5% of its holding in Borgun to payment solution provider Salt Pay.

Valitor, previously 98.78% owned by Arion Banki, provides full domestic and cross-border acquiring services for VISA, VISA Electron, Mastercard and Maestro cards to merchants and online merchants. Also, Valitor is a prepaid card processors and prepaid card issuer servicing the prepaid programmes of 50 European clients.

In 2016, Valitor processed more than 150 million transactions with a total value of ISK 650 billion. It serviced 12,000 of its own merchants and 260,000 sub-merchants through payment facilitators. Valitor had 12 issuing partners and 15 acquiring partners.

Head-quartered in Iceland, Valitor has a strong presence in the UK and in Denmark. Its unit, Valitor Iceland, consists of Iceland Acquiring and full issuing and processing services for Mastercard and VISA cards in Iceland. In June 2017, Valitor was awarded an Electronic Money Institution (EMI) licence in the United Kingdom.

Valitor offers BIN sponsorship and processing services for entities planning to run prepaid programs within European countries. Its BIN sponsorship services include access to the VISA and Mastercard payment networks, associated clearing and settlements services, as well as complete regulatory oversight. Valitor offers a full banking service including the ring-fencing of e-money in a trusted third-party bank account. This is done through the use of a credit institution license in Iceland which is passported throughout the EEA region alongside an e-money licence in the United Kingdom.

Sales and marketing activities are provided by the unit Valitor Global Partnerships, from London. There, the firm serves Valitor’s European issuing and acquiring partners. Valitor Global Partnerships operates independently and is a licenced EMI by the UK Financial Conduct Authority.

The unit Valitor Direct Channel, coordinates Valtor’s subsidiaries, Altapay (DK), Markadis, IPS and ‘Chip and Pin Solutions’ that is merged into Altapay. These four companies offer direct business relationships with merchants throughout Europe.

In October 2012, Valitor and Vancouver-based hyperWALLET, a Canadian provider of payment solutions, signed a deal to issue prepaid cards across Europe, e.g. including prepaid cards for corporations making regular payments to recipients.

In June 2015, Valitor claimed to be one of six companies in the European market to service Apple Pay. In 2017, Valitor acquired IPS Ltd (a POS gateway provider) and merged it with AltaPay to create a full-service omni-channel solution. Following this, the company acquired Chip & PIN Solutions in the UK, to service the payment needs of 1,000s of SMB retailers.

In April 2019, a court ruling found against Valitor for illegally blocking payments to Wikileaks in 2010 and the company was fined ISK 1.2 billion in Reykjavík District Court, after previously being legally compelled to open payments again about two years later.

In June 2019, Arion Bank announced that it was exploring sale options for Valitor following financial losses which amounted to ISK 8.6 billion in 2019. At the end of 2020 the net book value of Valitor was ISK 8.5 billion. In July 2021, Israel-based Rapyd entered into a definitive agreement with Arion Bank to acquire Valitor, for an estimated price of $100 million, and the acquisition was completed in 2022 following regulatory approval.

Korta Pay was established in June 2002 and operates in the field of acquiring and remote payment services. It is licensed as a payment institution by the FME. In 2016, Korta Pay claimed to service around 20% of Icelandic merchants. Korta Pay said it was the first Icelandic company to receive an onsite PCI DSS certification in 2005, and the certification has been renewed annually ever since. Korta Pay supports Verified-by-VISA and Mastercard Secure Code and now operates across Europe from its base in Iceland, providing a full range of POS terminals, POS and online acquiring, and payments management systems.

In April 2020, Kvika Bank announced the sale of its 41% shareholding in Korta to the UK-based Fintech company Rapyd. In June 2020, Rapyd completed the acquisition of Korta.

Payment Institutions in Iceland

As of 2023, there were 2 registered payment institutions in Iceland. Authorised in another EEA member state, more than 100 cross-border payment institutions provided notification of operating in Iceland under the EU passport system. Most of the institutions come from the UK and report payment services taking the form of a remittance business.

ATM Terminal Infrastructure

Accepted card brands at most Icelandic ATMs are debit cards (Maestro, VISA Electron) and credit cards (Mastercard, VISA, American Express, Diners, Discover, JCB, and UnionPay). Accepted card brands at ATMs include also Cirrus, Plus and Pulse. Withdrawals on UnionPay cards are available in over 90% of ATMs in Iceland, except for those in remote areas. The EMV migration of ATM terminals is complete.

Given the success of Icelandic banks and retailers in developing card payments, cash withdrawals from the ATM network have had low priority. The number of ATMs has been flat for several years before dropping slightly from 2007.

The impact of the COVID-19 pandemic is shown in ATM and cash withdrawal statistics. In 2023, there were an estimated 210 ATMs (-1.41% from 2022). Cash withdrawals in 2023 declined marginally by 1.17% from the decline recorded in 2022 but remains within the levels experienced since 2019. However, the cash withdrawals’ value on domestic and foreign cards at Icelandic ATMs was ISK 68.73 billion (+0.88% on 2022), with the ATV per cash withdrawal on cards equivalent to €215.62. In 2023, there were 888.7 cash withdrawals per ATM per month (+0.25% over 2022).

6 – ATMs and Cash Withdrawals in Iceland

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Note: the Central Bank has stopped publishing data for the use of debit and credit cards in banks and ATMs from September 2020, therefore, these figures have been estimated.
Source: Sedlabanki Islands.

Cash-advance Services in Iceland – Competition for ATMs 

In an Open Banking ecosystem, the dominant role of ATMs for cash withdrawal services may decline as more cash-advance and cash handling services are offered at retail outlets in Europe.

Cash in-Store – In parallel to ATM cash withdrawals on cards, Icelandic banks support cash-advance services on cards at POS terminals in retail outlets (see below).

POS Terminal Infrastructure

Accepted card brands at most Icelandic POS terminals are debit cards (Maestro, VISA Electron), and credit cards (Mastercard, VISA, American Express, Diners, Discover, JCB and UnionPay). Since 2012, UnionPay cards have been accepted at about 9,000 merchants in Iceland. The EMV migration of POS terminals is complete.

Given the success of Icelandic banks and retailers in developing card payments, payments at POS terminals have had high priority, however, the number of POS terminals has fallen with a compound annual growth rate of 0.80% since 2019. In 2023, there were an estimated 15,620 POS terminals (+0.26% vs 2022) of which more than 95% accept contactless cards.

In 2023, POS payments in Iceland with domestic and foreign cards were 202.2 million (+7.92% from 2022) with a total value of ISK 1,406.0 billion (+13.4% from 2022) amounting to 1,078.9 POS payments per POS terminal per month (+7.6% vs 2022). The ATV per POS payment on cards was equivalent to €48.85.

7 – POS Terminals in Iceland

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Note: Sedlabanki provides no subsequent update for POS terminal numbers. Figures from 2015 are estimated.
Source: Sedlabanki Islands.

MPOS Terminals – Small and mobile merchants have started to use their smartphones and tablet PCs as a kind of mini-POS+ECR device with added chip reader dongle. Also, merchants can initiate MOTO-like card payments on smartphones and tablets by downloading a payment app.

In December 2012, Square clones like iZettle, SumUp, Miura, and others launched their services in Europe and are expected to support Nordic merchants in particular.

In October 2012, Valitor and Icelandic MPOS terminal vendor Handpoint announced the support of mobile merchants together with Swedish terminal service provider Point (VeriFone Group). In June 2014, acquirer Borgun launched an MPOS solution in Iceland in partnership with Handpoint. The solution consists of a Borgun-branded app for iOS and Android, a PCI P2PE certified secure card reader, and an EMV payment service.

SmartPOS Terminals – In 2018, POS terminal vendors launched innovative new types of POS terminals. Named SmartPOS terminals, they combine the electronic cash register functionality (ECR) used by merchants in outlets with a contactless POS payment terminal and merchant services in the cloud. For the very first time, the so far separated ECR devices and POS terminals are integrated in just one checkout solution device. From late 2018, SmartPOS terminal vendors like Castles, Clover, Ingenico, Jusp, Handpoint, PAX, Poynt, Spire Payments, Verifone, Worldline, and others have launched their SmartPOS devices and services in Europe. It is believed that Icelandic SME merchants will embrace SmartPOS terminals.

Remote Internet Payments – Cards & More

Iceland is a small e-commerce market in Europe, but people shop online frequently. From 2015 and due to the EU VAT regulation, Icelandic merchants can decide to collect the applicable VAT rate for cross-border sales based on the consumers’ residence.

Internet Use – In 2023, 98% of all Icelanders used the internet and 88% purchased in online shops in the preceding 12-month period. Around 68% of Icelandic online buyers purchased from neighbouring EU countries. Online buyers purchase online using their PCs, notebooks, tablets, or smartphones. Thus, remote payments are initiated from various types of internet capable devices. In 2022, over 96% of Icelandic internet users went online using mobile devices (2015: 59%). Smartphone penetration is also high, at 93%.

According to Statistics Iceland, in 2019, 44% of enterprises in wholesale and retail were selling goods or services through websites or apps. By 2022, the figure had increased to around 67%.

According to retailer information, in 2023, the Icelandic B2C e-commerce value of goods and services was €0.63 billion (-3.08% vs 2022). The B2C e-commerce amount per capita accounted for, on average, €1,624.7 while it was €1,807.3 per online buyer. As of 2023, e-GDP represented 2.20% of the total GDP in Iceland.

8 – Internet Use in Iceland

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Note: e-Commerce value for 2013 onwards have been restated (some figures are estimates).
Source: Statistics Iceland, Eurostat, ITU.

Cards on the Internet (CNP) – All cards with international brands are accepted in Icelandic online shops after the merchant has signed an acceptance contract. Valitor and the Icelandic banks issue prepaid cards and virtual cards for internet use only.

Many online shops in Iceland offer remote payments on cards based on security standards like SSL with CVC2/CVV2 code and 3D-Secure (Mastercard SecureCode, Verified-by-VISA). Further, web-based MOTO services are offered to Icelandic merchants by their acquirers.

The Icelandic e-Payment Mix – In 2023, remote payment means offered by the merchants in Icelandic online shops were credit cards/debit cards: 89%, prepaid products: 6%, online bank transfer: 4%, and offline payments: 1%. Also, PayPal has achieved a market share.

According to the central bank, when Icelandic households buy goods and services, they use electronic payment solutions in 90% of cases. Of that total, over 31% use card-based payment apps in their smart devices, while payment cards accounted for around 90%, including slightly more than 17% via smart devices.

Remote Payments on the Mobile Internet – Since 2011, online buyers have started to use their smartphones for shopping on the mobile internet. Mobile online shops can be accessed by mobile internet, by mobile app, or by scanning a 2D QR-code displayed in a newspaper or at bus stations. Thus, remote mobile payments are executed either by using the e-payment page of the mobile online shop or by using payment apps from PSPs or acquirers.

Also, the Icelandic merchants can download a payment app from their acquirer in order to initiate MOTO payments with cards and/or online direct debits. Leading Icelandic merchants are believed to be testing their own mobile apps including loyalty functions (e.g., e-vouchers, discounts, outlet finder, QR-code scanning).

Mobile Payments – Overview 

The Icelanders are an online and mobile community. 123% of the population had subscribed to a mobile phone in 2023, but only a few mobile payment services are provided by the mobile network operators.

According to Eurostat, in 2023, individuals’ use of internet-enabled mobile devices was mobile/smartphone (93%), laptop (81%), tablet with touch screen (49%) and other portable devices (47%).

The next generation of mobile services and payments began in 2007, pushed by the online buyers’ high affinity to smartphones and tablets, and by new disruptive technologies (1D-barcodes, QR-code, Bluetooth BLE and NFC).

Mobile initiatives in Iceland are field testing and using new technologies either as initiating form factors to bridge to online shops on the internet (1D-barcodes, QR-code, NFC) or to enable contactless access to the retail POS outlet (1D-barcodes, QR-code, BLE, Bluetooth Low Energy, NFC Stickers, Mobile NFC Phones) e.g.:

The Icelandic m-Payment Mix – There are no official m-payment mix statistics, but PSP information indicates that the domestic m-payment mix is now similar to the e-payment mix on the Internet (see Remote Payments on the Internet section).

Mobile Payment Initiatives 

In 2024, the various European mobile payment initiatives can be grouped into

Mobile NFC Payment Pilot – Valitor, the four major Icelandic banks, VISA, POS terminal vendor Point, and the Icelandic mobile network operators Vodafone and Siminn ran the first mobile NFC payments pilot with VISA payWave cards in Iceland from January 2012 using the Oberthur SIM card service with 1,000 selected participants and 3,000 contactless cards at 900 contactless POS terminals in Iceland. In mid-2019, public transit operator Strætó reported that 40% of tickets were being paid for via contactless transactions at its terminals or on buses and trams. Also, in mid-2019, Íslandsbanki announced that contactless transactions via its Korta App had increased by 50% over the past 12 months.

In February 2020, FARA was selected to implement a contactless ticketing system for Strætó public transport in Rekjavik. The system is an account-based, open architecture, contactless payment system that supports closed loop and open loop payment, bar code and NFC-based mobile payments. The system includes contactless EMV capabilities based on the VISA MTT and Mastercard Transit model. The system will provide full APIs for 3rd parties.

Mobile payments are widely accepted and popular in Iceland. Apple Pay and Google Pay are commonly used throughout the country, including in small shops and at petrol stations outside the capital. These digital wallets allow users to make contactless payments using their smartphones or smartwatches.

There are no payment limits when using these mobile payment methods in Iceland.

Central Bank Digital Currencies, Cryptocurrency Products 

In 2023, the Icelandic payment ecosystem was composed of traditional cash payments, digital cryptocurrency products of independent payment service providers, and research and development of central bank digital currencies, CBDC. The regulation of cryptocurrencies is becoming increasingly relevant as independent cryptocurrency products have grown more prevalent, posing challenges for regulators and national central banks.

In July 2023, the European Union introduced the Markets in Crypto-Assets (MiCA) regulation, which aims to standardize cryptocurrency regulation across member states, including Luxembourg. This regulation addresses various aspects of crypto assets, such as market integrity, consumer protection, and financial stability, while also promoting innovation in the sector. Under MiCA, crypto-asset service providers will have specific obligations to protect users’ wallets and mitigate investment risks.

Central Bank Digital Currencies (CBDC) – The Digital Cash Challenge 

Central bank digital currency (CBDC), also called digital fiat currency or digital base money, is a digital currency issued by a national central bank (NCB), rather than by a commercial bank. It is also a liability of the NCB and denominated in the sovereign currency, as is the case with physical banknotes and coins.

All CBDCs are under the authority of the respective national central bank, and they are part of the domestic cash payment ecosystem. Rather than a new currency, CBDC is a form of central bank electronic money that could be used by households and businesses to make payments. In addition, most CBDC implementations will likely not use or need any sort of distributed ledger such as a blockchain.

Unlike “retail CBDC,” which is generally designed as a central bank liability universally accessible to individuals and businesses within a jurisdiction’s financial system, “wholesale CBDC” refers to a digitized central bank liability designed for sizable (generally interbank) transactions, and for which access is limited to certain financial institutions.

National Central Banks (NCBs) have been providing trusted money to the public for hundreds of years as part of their public policy objectives. Trusted money is a public good. It offers a common unit of account, store of value and medium of exchange for the sale of goods and services and settlement of financial transactions. Providing cash for public use is an important tool for central banks. Yet the world is changing.

Even before COVID-19, cash use for payments was declining fast and convenient digital payments have grown enormously in volume and diversity. To evolve and pursue their public policy objectives in a digital world, central banks are actively researching the pros and cons of offering a digital currency to the public, a “general purpose” CBDC.

Central banks’ interest in CBDC has increased as a potential means of delivering their public policy objectives. Profound, ongoing changes across finance, technology and society, as well as the recent COVID-19 crisis, provided additional impetus for the research of, and experimentation related to, CBDCs.

CBDC is a national digital currency issued by the central bank that is expected to replace or coexist with fiat money and hold the same value. Mobile money, on the other hand, utilises existing commercial banking-based accounting to manage customer wallet balances based on an exchange with cash or lines of credit and loans.

CBDC is a direct liability on the central bank as it is the main issuer of the currency, whereas digital money is the liability of commercial banks and other authorised financial institutions using funds on account. Although some implementation approaches propose that CBDC can be implemented in either an indirect or hybrid form, its liability remains on the respective national central bank.

Background on CBDC Evolution

In October 2020, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank for International Settlements (BIS) published a report, Central bank digital currencies: foundational principles and core features, identifying the foundational principles necessary for any publicly available CBDC to help central banks meet their public policy objectives.

The report focused on a publicly available “general purpose” CBDC (a digital payment instrument, denominated in the national unit of account, that is a direct liability of the central bank).

A “wholesale” CBDC, restricted to financial institutions, is also an active area of exploration, notes the report, for central banks but one that carries different opportunities, challenges, and risks. The report explored the use cases for, and challenges and opportunities arising from, the possible issuance of a general purpose CBDC.

In September 2021, the same seven central banks and the BIS followed up with the publication of a new set of reports exploring the potential of retail CBDCs, including policy options and practical implementation issues. While none of the central banks has yet decided to proceed with a retail CBDC, they recognise such an instrument would have wide-ranging implications. Delivering on the future needs of consumers would require systems that encourage innovation, choice and competition among a diverse mix of intermediaries.

BIS reported that a 2021 survey of central banks found that “86% are actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.

The People’s Bank of China (PBoC) is piloting a ‘digital yuan’, known as e-CNY, in various cities, often in association with major sporting events, such as the Winter Olympics.

The ECB published a paper on the potential of a “digital euro” in October 2020, exploring the “benefits and risks” of such an initiative. It completed a public consultation in January 2021 and a series of focus groups in December 2021. Its investigation stage is expected to continue until October 2023, after which the ECB “will decide whether to start developing a digital euro.”

The US Federal Reserve reported in February 2022 that while it has made no decisions about “whether to pursue or implement” a CBDC, it was “exploring the potential benefits and risks of CBDCs from a variety of angles and was inviting public feedback on discussion papers.

The Bank of Japan said in October 2020 that it had no plans for a CBDC and was committed to maintain the cash system as long as there was public demand for it. It nevertheless intended to explore technical feasibility through a proof of concept, consider institutional arrangements and coordinate approaches with domestic and international stakeholders. In 2023, the Bank of Japan (BOJ) has announced that it will begin a pilot for its digital yen with commercial financial institutions. In February 2023, Bank of Japan has embarked on a CBDC trial.

In June 2023, the BIS and BoE said they completed a CBDC pilot project involving CBDCs jointly run by the Bank of England (BoE) and the Bank of International Settlements (BIS). Project Rosalind was designed to explore how a “universal and extensible API layer” could connect central bank and private sector infrastructures and enable retail CBDC payments. The project also sought to develop a number of retail-CBDC use cases.

According to the BIS and BoE, the project has successfully demonstrated that “a well-designed API layer could work with different private sector applications and central bank ledger designs and that a set of simple and standardised API functionalities could support a diverse range of use cases”.

In all, the project led to the development of 33 API functionalities and examined 30 retail CBDC cases including peer-to-peer transfers, retail payments for goods and services and small-value business transactions.

While CBDCs are still in experimental phases across major economies, 2024 has seen increased momentum towards real-world implementation, with several countries, notably China and the ECB, moving closer to full-scale rollouts. Public-private collaboration, technological innovation, and privacy concerns remain central to future CBDC development. Central banks worldwide continue to balance innovation with maintaining public trust and financial stability in this rapidly evolving space.

Global Status of CBDCs 

Most National Central Banks (NCBs) are involved in different stages of a CBDC project. Especially, the NCBs have different views on which kind of CBDC they would intend to launch as a digital currency:

As of 2023, the global CBDC status reveals that four central banks – Nigeria (e-Naira), Eastern Caribbean (D-Cash), Jamaica (JAM-DEX), and the Bahamas (Sand Dollar) – have introduced a domestic CBDC scheme.

Six countries have launched a CBDC pilot: France, Canada, China, India, Saudi Arabia, and Ghana.

The NCBs of most other countries are involved in either a CBDC proof-of-concept phase – including Norway, Hungary, and Sweden – or they are still in a CBDC research stage.

So far, Ecuador is the only country that has cancelled its CBDC ambitions, Dinero electronico.

CBDC, the European Union and the Digital Euro

In July 2021, the Estonian Central Bank released a report about its experiment with the ECB and the central banks of Spain, Germany, Italy, Greece, Ireland, Latvia, and the Netherlands to assess the functionality of the digital euro. The project was able to conduct 300,000 transactions per second, with an average rate of less than two seconds per transaction.

In June 2023, the European Commission (EC) has published its legislative proposal establishing the legal framework for a possible digital euro, stressing that the CBDC would be a compliment to, not replacement for, cash.

A digital euro would be available alongside existing national and international private means of payment, such as cards or applications. It would work like a digital wallet, with people and businesses able to pay with it anytime and anywhere in the euro area.

The digital euro would be available for payments both online and offline. While online transactions would offer the same level of data privacy as existing digital means of payments, offline payments would essentially be like paying with cash – with nobody able to see what people are paying for.

The digital euro would be distributed by banks and other payment service providers, with basic services provided to people free of charge. Merchants would be required to accept the digital currency unless they are cash-only firms.

The EC’s proposal still needs to be adopted by the European Parliament and the European Council before the European Central Bank decides whether to roll out a digital euro. Notably, the European Central Bank (ECB) is involved in the preparation phase, which will run until 2025. During this time, technical experimentation and legal discussions are ongoing before any formal rollout decisions can be made​.

CBDC and Iceland

As of mid-2023, Iceland’s central bank was exploring the possibility of issuing a retail CBDC, Rafkróna. However, no official decision has been made regarding its issuance.

Pros and Cons of CBDCs

According to research by the Bank of England, BIS, and by several other central banks, the benefits of CBDCs include supporting increased innovation in the payment system with:

Possible challenges related to use of CBDCs could include:

The ECB commissioned multiple exploratory reports on the feasibility of a digital euro in 2020 and 2021. The ECB’s working paper suggests a two-tier system for a “general purpose” CBDC. In July 2021, the ECB announced that it would launch a 24-month investigation phase for the digital euro project, which aims to address key issues regarding the design and distribution of a digital euro. The investigation phase will include focus groups, prototyping and conceptual work. In February 2022, the European Commission announced that it will propose a bill that would serve as the legal foundation for the issuance of a digital euro by the ECB. In May 2022, Christine Lagarde stated that she would be willing to back the digital Euro. By June 2023, the ECB and European Commission had significantly advanced their legislative and technical work, moving closer to launching a pilot phase for the digital euro in 2024. The pilot phase is expected to assess the practical implementation of the digital euro, following the completion of the current investigation period​.

The working paper states that the use of CBDC for retail payments is the primary use-case for the development of a digital Euro. The paper also rejects the motivation of using CBDC as a store of value, which would involve consumers switching deposits from commercial banks into CBDC. The working paper also recommends that a CBDC should be interest-bearing, with attractive interest rates offered for smaller sums suitable for payments and lower rates available for larger amounts.

Unregulated Cryptocurrency Products – Background 

Regulators and national central banks are challenged by unregulated independent cryptocurrency products. Whereas CBDCs are under the authority of the central bank, almost all cryptocurrencies are decentralised, and not controlled or managed by any central authority.

Obviously, financial market authorities and the national central banks are not in favour of unregulated cryptocurrency products, and they see them as a systematic risk for the financial system. Their intention to regulate the respective cryptocurrency exchange platforms has gained momentum.

Cryptocurrencies, originally designed as a store of value, are digital assets, developed and maintained on decentralised blockchains, and they can be used as a medium of exchange or payment method. Bitcoin and Ethereum are the most popular forms of cryptocurrencies worldwide used by consumers and businesses for transactions.

As of 2022, over 400 million people worldwide used cryptocurrencies, with merchants and businesses in more sectors accepting it as a form of payment. The major payment schemes VISA and Mastercard, PayPal and along with a growing number of financial institutions, have launched services allowing consumers to purchase or use cryptocurrencies for a range of applications.

According to a 2022 Deloitte survey, around two-thirds (64%) of surveyed merchants indicated that their customers have significant interest in using digital currencies for payments, and 83% expect consumer interest in digital currencies for payments to increase or significantly increase over the next 12 months.

In addition, merchants are motivated by the prospect of enabling immediate access to funds (40% of respondents), taking advantage of blockchain-based innovations in decentralised digital finance (39%), and allowing in-house management of the revenue cycle/treasury/finance department (39%).

Over half (54%) of large retailers (with revenues of $500 million and up) have invested more than $1 million on enabling digital currency payments, while only 6% of small retailers (with revenues of under $10 million) did so.

A 2022 survey from Checkout.com found a sharp rise in people wanting to use cryptocurrencies as a means of payment, with 40% of 18-35-year-old consumers citing their desire to experiment with using crypto as a payment method, up from less than 30% in 2021. Meanwhile, over 80% of businesses say offering crypto has attracted new customers, led to a decrease in chargebacks, while just over 60% have seen higher authorisation rates accepting crypto payments.

A recent report by Triple-A put cryptocurrency ownership in Europe at around 49 million people.

Stablecoins

Stablecoins are a type of asset-backed cryptocurrency, whose value is typically pegged to the value of an underlying asset such as USD, GBP, or commodities like gold. Stablecoins are partially backed by real assets, and they are designed to have a value pegged to real-world assets, therefore avoiding the extreme volatility that affects cryptocurrencies.

Stablecoins offer the potential benefits of cryptocurrencies, like transparency, security, immutability, and decentralised control, while maintaining the guarantees and stability that come with using fiat currency. Stablecoins have potential to be used in cross-border payments, providing a secure, online environment for peer-to-peer (P2P) transactions to take place without needing decentralised cryptocurrencies or to pay fees to convert money into local currencies.

As of 2024, there were more than 200 stablecoins globally, comprising a market that’s worth approximately $174 billion.

A survey of central banks in January 2021 found that two-thirds of respondents are actively researching the potential impact of stablecoins on financial stability. However, some regulators in the US and China, consider stablecoins as a potential serious risk to financial systems. The risk is especially high with centralised coins, such as those backed by fiat and issued by private organisations, as economic power would be disproportionately concentrated on a single entity.

The widespread use of stablecoins in payment platforms could also pose a systemic risk, in relation to the validation and confirmation of stablecoin transactions which could interfere with payment systems. If stablecoin users couldn’t access money in their e-wallets and businesses couldn’t receive payments, economic activity would be greatly disrupted. However, these risks have not deterred major institutions like JP Morgan and VISA to explore stablecoin use cases via partnerships and internal R&D.

Tether As of 2024, Tether remains the largest stablecoin globally, holding a market share of over 50%. This dominance is driven by its widespread usage and liquidity in crypto markets. Its nearest competitors include USD Coin (USDC), Binance USD (BUSD), and decentralized stablecoins like DAI, although Tether’s market share far exceeds them. Recent reports have shown Tether’s involvement in major financial markets and even Bitcoin mining, further reinforcing its stronghold on the crypto landscape.

Regarding Facebook’s Diem (formerly Libra) project, it was officially abandoned. Diem’s assets were sold off to Silvergate Capital in early 2022, marking the end of the initiative that once aimed to create a globally accessible digital currency. Regulatory pressures and internal challenges led to the dissolution of the project.

Cryptocurrencies and Iceland

In June 2019, the Financial Supervisory Authority of Iceland (FME) approved Monerium’s e-money license to issue fiat-backed stablecoins using the Ethereum blockchain.

Market Size and Dynamics

Cards in Issue

VISA is the larger of the schemes in Iceland, with an estimated two-thirds of the market measured by cards issued and even greater preponderance in terms of expenditure and the number of payments.

In 2023, there were 993,472 bank cards in issue for a country with a population of 387,758, equivalent to a medium-sized European city, representing 2.56 cards per capita, down by 18.56% from 2022. In 2023, there were 469,661 debit cards (up 14.31% from 2022), 47.27% of the cards total, and 523,811 credit cards (-32.22% from 2022).

According to the central bank, however, only 339,336 debit cards (+10.43% from 2022) and 313,995 credit cards are active cards, giving an active base of nearly 653,331 cards, just 65.76% of total cards issued.

The debit card segment, which had continued to grow, saw a significant decline in 2015 while the credit card base saw significant growth in 2015 by 22.3%. It is believed that a significant number of inactive debit cards branded Maestro or Electron have been replaced by credit cards.

9 – Payment Cards in Iceland

[ninja_tables id=”4212″]

Note: Sedlabanki figures are for cards issued.
Source: Sedlabanki Islands.

Card Fraud

Card fraud is one of the most fascinating aspects of the payments industry, not least because it is relentless and mutating. EMV implementation and 3D-Secure, combined with Strong Customer Authentication (SCA), have done much to reduce domestic losses from lost and stolen cards in Europe. However, the war against fraud losses and the changing face of fraud continues to be a threat to the payments industry, including Iceland.

The global card fraud challenges are Card-Not-Present fraud (CNP), cross-border fraud, and counterfeiting on non-EMV cards. CNP fraud accounted for 80% of the total value of card fraud losses in 2022. In 2017, a new payment fraud category are fraud losses on contactless card payments. International card fraud continues to be smaller in scale than domestic card abuse but is proportionately far more common. And of course, fraudulent cross-border transactions on cards continue to grow on all purchase channels.

Losses from card fraud on the internet and cross-border fraud on domestic cards have grown significantly. Following EMV implementation, card fraud has moved increasingly to countries where POS terminals or online shops have not yet been migrated to EMV and SCA, respectively, and to cross-border fraud with compromised cards.

The breakdown of card fraud losses by method of compromise already indicates the importance of distinguishing between domestic and cross-border fraud losses. The method of compromise covers the means by which fraudsters obtain payment cards or card details. Notable methods of compromise in a complex payment world are CNP fraud based on theft of card credentials and card lost and stolen fraud followed by growing ID fraud and by cross-counterfeit fraud.

The main method of compromise responsible for losses in many European countries is now the theft of card credentials. A high proportion of these card fraud losses are caused by the growth in e-commerce, and still the lack of use of Strong Customer Authentication methods such as 3D-Secure.

In a post-data-breach world, identity information, payment credentials, account credentials and responses to security questions are widely available for purchase in bulk. Complete fraud exploits and zero-day attacks are also easily available on the black market for outright purchase or as a hosted / fully managed service.

In the digital payments world and having the changing face of fraud in mind, there are significant challenges for card issuing banks, payment service providers and their supporting processors.

No fraud statistics on a domestic level have been reported, but it is said that the fraud rate in Iceland was lower than 0.04% (4 basis points) of the payments value in 2018.

As most POS card transactions are authorised online-to-issuer, acquirer fraud rates in Iceland are under control except for offline vending machines, e-commerce and other hotspots.

Credit card fraud prevention measures taken have been pushing 3D-Secure, updating banks’ fraud prevention systems and real-time-scoring, implementing more rule-based fraud control mechanisms. Also, issuers offer PIN selection at ATMs and SMS notification to inform cardholders about the use of their credit card.

Card Use

Card use in Iceland is the highest in the world, reflecting the extension of card payments into new areas.

In 2023, payments with Icelandic cards at domestic retail outlets and abroad were 207.50 million (+7.21% on 2022) with a total value ISK 1,401.11 billion (+10.28% on 2022). The ATV per card payment amounted to ISK 6,752.2 (€43.98), and there were 317.6 payments per active card per year (-6.91%) compared to 2022.

10 – Payments with Icelandic Cards

[ninja_tables id=”4211″]

Note: figures are for payments with Icelandic cards at retail outlets in Iceland and abroad.
Source: Sedlabanki Islands

Transactions – Sedlabanki Islands, the Icelandic central bank, notes that Icelandic cards are used not only at retail outlets but, also, at ATMs and at bank branches. Thus, Table 12 shows a more complete view of card use in Iceland.

In 2023, transactions on Icelandic cards were in total 208.7 million (+7.04% over 2022) with a total value of ISK 1,458.0 billion (+9.44% Vs 2022). In 2023, transactions with Icelandic credit cards achieved a market share of 53.06% by value, up from 52.59% in 2022.

11 – Transactions on Icelandic Cards by Card Type

[ninja_tables id=”4210″]

Note: figures are for all transactions with domestic cards and with foreign issued Icelandic cards.

Background – Among the factors behind the remarkable high level of Icelandic card usage:

Despite concerns that the banking crisis might hit card payments, the small fluctuations in numbers have settled and saw considerable growth both in credit and debit card payments, from 2011.

As might be expected, merchants in Iceland are generally positive about the acceptance of cards, which in practice, is a necessity given the strength of consumer demand. Consumers expect to be able to pay with cards practically everywhere, including the health sector.

Merchant service charges (MSC) are comparatively low. Typically, there is a transaction fee of around €0.015 per transaction on debit and annual fees on credit cards, mainly to cover travel insurance.

Card use has also been successfully extended to small payments in merchants such as newsagents and fast food outlets. Because the fraud risk is negligible, cardholders are able to pay for items such as newspapers without signature or PIN verification.

Recurring Payments on Cards – A particular area of card payments where Iceland leads the world is the use of cards for recurring payments. As far back as 1986, arrangements were introduced to enable instalment purchases by credit card. Cardholders can authorize the charging of a monthly instalment over a defined period to their accounts. This has encouraged the use of cards to buy furniture, household appliances and even second-hand cars.

Recurring card payments were extended to sectors where customers pay regular monthly bills in 1987. Debit and credit cards are now widely used to make regular payments such as insurance premiums, media subscriptions, phone and utility bills. The service has been extended to other regular payments such as local taxes, day care charges, leisure activity club fees and charitable donations. Even regular stock and share investments are made this way.

Business Payments – The other target for cards in Iceland is business payments. 48,000 corporate cards are being used to replace business cheques, with evident effect. Central bank figures show that the number of cheques continued falling sharply with the phase-out effective by end-2017.

Iceland has achieved its objective of phasing out cheques: by the end of Q1 2018, no new cheque transactions were being recorded, although a transaction value of ISK 0.7 bn suggests that cheques were still being honoured when presented for processing, as is to be expected.

Card Use per Capita – Icelandic Specific

The dramatic events of late 2008 have had only a slight impact to date on Iceland’s status as having the world’s highest level of card payments per capita. In 2009, there was a one-time decline in the number of credit card payments. Figures for 2023 showed 433.1 domestic debit and credit card payments per capita in Iceland.

Including all card transactions, in 2023, there were 245.6 debit card transactions per capita. In addition, there were 187.5 credit card transactions per capita, giving a total of 433.1 card transactions per capita, up 1.84% from 2022.

12 – Domestic Card Payments Per Capita in Iceland

[ninja_tables id=”4209″]

Note: figures are for domestic payments and domestic expenditure on cards.
Note: ISK have been converted to € at the central bank’s average annual exchange rate.
Source: Sedlabanki Islands.

Debit Cards

Debit cards were used in the country for a total of 96.4 million domestic transactions in 2023, a 5.14% increase on 2022. The domestic debit card transactions value, at ISK 557.2 billion, up by 4.93% from 2022.

13 – Debit Card Transactions in Iceland

[ninja_tables id=”4208″]

Note: statistics cover purchases and cash withdrawals.
Note: the Central Bank has stopped publishing data for the use of debit and credit cards in banks and ATMs from September 2020, therefore, these figures have been estimated.
Note: 0.0 figures are values of less than half a million, totals may not equal constituents because of rounding.
Source: Sedlabanki Islands.

Debit cards use in bank branches – While purchases at retail outlets accounted for 98.57% of domestic transactions by number, bank transactions comprised 0.08% in 2023, and the ATV per domestic debit card at retail outlets was ISK 5,253.62 equivalent to €36.91.

The reason for the high proportion of debit card transactions by value at bank branches is that Icelanders use their debit cards at branch teller stations to pay for their loans and bills and to carry out giro transactions. The card is used by the teller to generate customer and account information in order to reduce transaction time by automatically printing the necessary documentation, i.e. orders of withdrawal against bills paid. Only a small proportion of the bank transactions reflect the withdrawal of cash.

As of September 2020, the central bank no longer provides data on debit card use in retail outlets or bank branches.

Credit Cards

Credit cards issued are branded Mastercard or VISA. Historically, few American Express cards were issued (e.g. 2008: co-branded IcelandAir American Express cards). In 2017, however, American Express pulled out of the issuing business in Iceland.

In addition to the high levels of debit card use, there are significant levels of credit card use in Iceland. The value of credit card transactions has increased in recent years, as have numbers of transactions, with a slight downturn in 2009 following the crisis. From 2010, credit card transactions showed steady growth rates.

Credit cards were used in the country for a total of 91.6 million transactions in 2023, a rise of 4.73% from 2022. The total transaction value, at ISK 773.6 billion in 2023, increased by 10.41% from 2022.

14 – Credit Card Transactions in Iceland

[ninja_tables id=”4207″]

Note: statistics cover purchases and cash withdrawals.
Note: 0.0 figures are values of less than 500,000 or ISK 50m, totals may not equal constituents because of rounding.
Source: Sedlabanki Islands.

Leading Card Issuers

Íslandsbanki (formerly Glitnir) offers a range of contactless Debit Mastercard cards, Mastercard credit cards and prepaid cards. Íslandsbanki cards issued include platinum cards, student cards, XY Debit Mastercard cards for young ones from 12 to 16, and credit cards with revolving credit function. From 2015, all cards are issued with added contactless function. In 2022, the bank had an estimated 350,000 cards in circulation (a market leader in payment cards for individuals with a 39% market share).

In November 2014, Íslandsbanki decided to simplify its payment card offerings. In conjunction with the change, Íslandsbanki reported deciding to only issue Mastercard cards, Debit Mastercard cards, and American Express cards while discontinuing issuing VISA cards.

In 2016, Íslandsbanki simplified its card portfolio from 117 to 15 credit card types and from 26 to eight debit card types. This entailed swapping its 95,000 VISA Electron and Maestro debit cards for Debit Mastercard cards. The same applied to its credit card portfolio. More than 40,000 cardholders took advantage of the new digital PIN change feature allowing them to choose their own PIN at ATMs.

In April 2018, Íslandsbanki introduced a new credit card management app that facilitates card management and delivers clear overviews of transactions and loyalty points. Íslandsbanki faced the challenge of migrating data, including loyalty offerings, from American Express to Mastercard following the closure of American Express’ operations in Iceland. In 2018, all Kreditkort cards were rebranded as Íslandsbanki cards (see “Kreditkort”, below).

In 2019, the new unified Íslandsbanki app was launched, enabling customers to view their account balances and activity, loans, payment cards, and electronic documents in one app.

Arion Banki (formerly New Kaupthing) offers a range of contactless VISA Debit cards, credit cards (VISA) and prepaid cards. Arion cards issued include Svarta Kortio and Atlas for the youth segment and prepaid ‘Plus’ cards. Its VISA Gold and Platinum cards include travel insurance and lounge access.

Landsbankinn (formerly Landsbanki) offers a range of contactless VISA Debit cards, VISA credit cards and prepaid cards. From 2015, all cards are issued with added contactless function.

The Icelandic savings banks (Sparisjóðurinn) offer a range of VISA Debit cards, VISA credit cards and prepaid cards. SPRON in Reykjavik had been one of the Icelandic savings banks. Following the banking meltdown SPRON is now part of Arion Banki (New Kaupthing).

SPRON’s ‘e-Card’ programme offered loyalty rebates and frequent flier points with Icelandair, the national airline; in 2007, its 27,000 cardholders received discounts and direct payments worth ISK 60 million. SPRON restructured its card operations in 2007, closing down SPRON cards and transferring the business to its commercial banking unit. Its e-Cards and e-Frequent Flyer cards were transferred to individual SPRON branches.

Kreditkort, 100%-owned by Íslandsbanki, is an issuer of Mastercard cards and American Express cards (first issued in April 2008). Kreditkort was the first to offer credit cards in Iceland.

Kreditkort, which provides credit card services to corporations and government agencies as well as private individuals, said a total of 140,000 Mastercard cards were in circulation in Iceland at end-2007, up from 105,000. In 2021, Íslandsbanki reported that Kreditkort had nearly 90,000 credit cards in circulation. Íslandsbanki claimed a 38% market share in credit cards in 2023.

Appendix

Iceland Banks’ Foreign Expansion

Before the banking meltdown, Icelandic banks expanded into the Nordic region and the UK. Kaupthing operated in all the Nordic countries and was one of the region’s top 10 banks, though with a focus on corporate rather than retail banking. From €5 billion in 2002, its assets rose to €58 billion by end-2007. Among major banking deals were the purchases of Denmark’s FIH in 2004, Singer & Friedlander, the UK merchant bank, in 2005 and the Dutch corporate bank NIBC in 2007. In May 2007, Kaupthing declared a shareholding of 20% in Storebrand, the Norwegian insurance and financial services company.

Kaupthing, then an investment bank, merged with the retail orientated Bunadarbanki Islands (Agricultural Bank of Iceland) in May 2003, in a deal worth ISK 61 billion (€700 million) which formed Kaupthing Bunadarbanki, the country’s biggest banking group. Glitnir/Islandsbanki and Landsbanki were in second and third place; historically, Landsbanki has always been the biggest bank.

Glitnir/Islandsbanki, Kaupthing’s closest rival in Iceland, adopted Norway, where it had 60,000 retail customers, as its second market, and launched retail banking operations in Finland in 2007. Its predecessor company, IslandsbankiFBA, was formed early in 2000 from the merger of Islandsbanki and FBA, creating the largest company by market capitalisation on the country’s stock exchange. The merger followed privatisation of the two banks. Landsbanki and Bunadarbanki announced merger plans, but these were opposed by the Icelandic competition authority.

Landsbanki claimed a market share of 28% in domestic banking in Iceland at end-2007, with 28% of debit card and 27% of credit card turnover. During 2007, it launched retail banking operations outside Iceland for the first time and reported 220,000 ‘Icesave’ online savings accounts in the UK by mid-2008. In May 2008, Landsbanki launched Icesave in the Netherlands. Landsbanki purchased Heritable, a UK housing finance specialist, in 2002.

Impacts of the Financial Crisis – Background

By mid-2012, Iceland’s recovery from financial collapse continued to be slow. Wrangling with the UK and Dutch governments over Iceland’s obligations to savers in Landsbanki’s Icesave accounts (see Appendix) was delaying the receipt of new IMF loans and complicating Iceland’s application for EU membership.

The crisis of confidence which hit Iceland’s currency and banking system reached its peak in October 2008, when in the space of a few days the country’s three biggest banks were taken into receivership by the Financial Supervisory Authority (FME) and their operations limited to domestic activities. Total assets of the three banks at that time amounted to more than ten times Iceland’s 2007 GNP.

The three major commercial banks – Kaupthing (now known as Arion Banki), Islandsbanki (formerly Glitnir) and Landsbanki Islands (National Bank of Iceland) – remained open and met their commitments to Icelandic depositors. However, their operations in other countries, notably the UK, Netherlands and Norway, were wound down. Iceland’s finances were stabilised in mid-November with over $5 billion of loans and currency swaps, $2.1 billion from the IMF and $3 billion from Denmark, Finland, Norway, Poland, Russia and Sweden. The Glitnir brand was dropped in February 2009 and the group reverted to being called Islandsbanki, its original name.

The country’s savings banks, which represent around a quarter of the domestic retail banking market, attempted to continue normal operations after the nationalisation of the commercial banks. However, SPRON (Reykjavik Savings Bank), the biggest savings bank, and Icebank/Sparisjodabankinn, requested state help in March 2009 and were taken over by the FME.

SPRON and Kaupthing won official approval for their proposed merger in mid-2008, but the banking crisis prevented completion of the deal. Immediately after SPRON’s takeover by the FME, however, it was merged with New Kaupthing, now Arion Banki, while Icebank/Sparisjodabankinn was taken over by Sedlabanki, the central bank.

The CAI Regulation of 2008 – Background

In January 2008, VISA Iceland/Greidslumidlun, Mastercard Iceland/ Kreditkort and FGM concluded a settlement with the Competition Authority of Iceland (CAI), agreeing to pay administrative fines totalling ISK 735 million (€8 million). According to the Competition Authority, Greidslumidlun admitted “to having abused its dominant position in the market by taking actions which targeted a new competitor, PBS/KORTA.” Greidslumidlun and Kreditkort “also confessed to having engaged in long-standing and extensive collusion.” The settlement with FGM included an admission that it “violated the ban in the Competition Act on anti-competitive practices by associations of undertakings.”

The fines broke down to ISK 385 million (€4.1 million) for Greidslumidlun, ISK 185 million (€2 million) for Kreditkort and ISK 165 million (€1.8 million) for FGM. All three undertakings also agreed “to change their business practices and conduct in the market,” according to the CAI summary of the settlement.

“In determining the amounts of the fines, it has been taken into consideration that these are serious violations of the Competition Act and liable to cause significant distortion of competition, as well as the fact that the violations extended over a long period. It is borne in mind that Greidslumidlun has possessed an extremely strong position in the market,” the CAI said.

However, the CAI also noted that the accused companies took the initiative in seeking a settlement and “confessed to the violations of the Competition Act without reservation.” In determining the fines, “Greidslumidlun in particular is rewarded for being the first to step forward and admit its participation in collusion. Generally speaking, it is important that companies that break ranks in collusion, or take the initiative in admitting such violations or supplying information on them, should benefit from reductions in fines.”

The investigation began with a ‘dawn raid’ on the business premises of Greidslumidlun in June 2006, followed by a search of Kreditkort and FGM. In its summary of the investigation, CAI said that documents found showed that Greidslumidlun managers were hostile to the competition from PBS/KORTA.

“Memos were composed and e-mail messages written revealing an intent to drive PBS/KORTA out of the Icelandic acquiring market, and certain actions were planned for this purpose. The objective, according to documents from Greidslumidlun, was to prevent the new competition from cutting into the profits of Greidslumidlun derived from this line of business; at the same time, the exclusion of PBS/KORTA was intended as a warning to any other parties proposing to start competing in the Icelandic market. The actions taken by Greidslumidlun for the purpose of driving PBS from the market were of various kinds, and this abuse continued during the years 2002-6.”

CAI listed the specific actions taken by Greidslumidlun:

The settlement ends with a new framework for relations between Greidslumidlun, Kreditkort and FGM:

Data Tables

1 – Leading Banks in Iceland

[ninja_tables id=”4220″]

Note: Kvika Banki hf. was formerly MP Banki hf., changing its name in October 2015.
Source: PCM research.

2 – Financial Service Sectors in Iceland

[ninja_tables id=”4219″]

Note: some figures restated by the Central Bank.
Note: other credit institutions includes failed banks (‘bad banks’) from end-2015.
Note: total includes Central Bank assets, insurance companies and mutual fund, investment and institutional funds.
Source: Sedlabanki Islands.

3 – Average Exchange Rates

[ninja_tables id=”4218″]

Source: Sedlabanki Islands.

4 – Issuer Banks in Iceland

[ninja_tables id=”4217″]

Note: in 2018, Kreditkort became rebranded as Islandsbanki.
Source: PCM research

5 – Acquirers in Iceland

[ninja_tables id=”4216″]

Note: In 2022, Valitor absorbed Korta Pay.
Source: PCM research

6 – ATMs and Cash Withdrawals in Iceland

[ninja_tables id=”4215″]

Note: the Central Bank has stopped publishing data for the use of debit and credit cards in banks and ATMs from September 2020, therefore, these figures have been estimated.
Source: Sedlabanki Islands.

7 – POS Terminals in Iceland

[ninja_tables id=”4214″]

Note: Sedlabanki provides no subsequent update for POS terminal numbers. Figures from 2015 are estimated.
Source: Sedlabanki Islands.

8 – Internet Use in Iceland

[ninja_tables id=”4213″]

Note: e-Commerce value for 2013 onwards have been restated (some figures are estimates).
Source: Statistics Iceland, Eurostat, ITU.

9 – Payment Cards in Iceland

[ninja_tables id=”4212″]

Note: Sedlabanki figures are for cards issued.
Source: Sedlabanki Islands.

10 – Payments with Icelandic Cards

[ninja_tables id=”4211″]

Note: figures are for payments with Icelandic cards at retail outlets in Iceland and abroad.
Source: Sedlabanki Islands

11 – Transactions on Icelandic Cards by Card Type

[ninja_tables id=”4210″]

Note: figures are for all transactions with domestic cards and with foreign issued Icelandic cards.

12 – Domestic Card Payments Per Capita in Iceland

[ninja_tables id=”4209″]

Note: figures are for domestic payments and domestic expenditure on cards.
Note: ISK have been converted to € at the central bank’s average annual exchange rate.
Source: Sedlabanki Islands.

13 – Debit Card Transactions in Iceland

[ninja_tables id=”4208″]

Note: statistics cover purchases and cash withdrawals.
Note: the Central Bank has stopped publishing data for the use of debit and credit cards in banks and ATMs from September 2020, therefore, these figures have been estimated.
Note: 0.0 figures are values of less than half a million, totals may not equal constituents because of rounding.
Source: Sedlabanki Islands.

14 – Credit Card Transactions in Iceland

[ninja_tables id=”4207″]

Note: statistics cover purchases and cash withdrawals.
Note: 0.0 figures are values of less than 500,000 or ISK 50m, totals may not equal constituents because of rounding.
Source: Sedlabanki Islands.

Digital & Card Payment Yearbooks