Electronic money and payment services

The issuance and handling of electronic money is subject to Act no. 17/2013 (in Icelandic) on the Issuance and Handling of Electronic Money. The act implemented Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money.

The Central Bank of Iceland supervises the activities of electronic money institutions, pursuant to Article 28 of the Act.

According to Article 3 of the Act, the issuance of electronic money is only permitted to those who are licensed to issue it. The issuer of electronic money refers to the following parties, cf. point 8 of Article 4 of the Act:

• Elec­tronic money in­sti­tu­tions
• Fin­an­cial un­der­tak­ings li­censed to re­ceive de­pos­its or other re­pay­able funds from the pub­lic and to grant loans
• The European Cent­ral Bank (ECB) and the cent­ral banks of coun­tries in the European Eco­nomic Area when not act­ing in their ca­pa­city as a pub­lic mon­et­ary au­thor­ity
• Pub­lic au­thor­it­ies if the pay­ment ser­vices are not con­nec­ted to their role as such

Electronic money institutions, Financial undertakings licensed to receive deposits or other repayable funds from the public and to grant loans,  The European Central Bank (ECB) and the central banks of countries in the European Economic Area when not acting in their capacity as a public monetary authority.

Public authorities if the payment services are not connected to their role as such.

Electronic money institutions are also subject to Rules no. 322/2014 (in Icelandic) on the safeguarding of funds received by electronic money institutions.

Applications and conditions for an e-money business licence are governed by Chapter III of the Act. Electronic money institutions are permitted to engage in the following activities, in addition to issuing electronic money:

• The pro­vi­sion of pay­ment ser­vices as provided for in the Act on Pay­ment Ser­vices
• Lend­ing in con­nec­tion with pay­ment ser­vices re­ferred to in items d and e of point 22 of Art­icle 3 and point 14 of Art­icle 2 of the Act on Pay­ment Ser­vices, if the con­di­tions of para­graph 4 of Art­icle 16 of the Act are met
• Other activ­it­ies and sup­port ser­vices re­lated to the is­su­ance of elec­tronic money or the pro­vi­sion of pay­ment ser­vices re­ferred to in item a
• Op­er­a­tion of pay­ment sys­tems ac­cord­ing to the defin­i­tion of the Act on Pay­ment Ser­vices
• Other activ­it­ies, un­less they are re­stric­ted by this or other acts

The provision of payment services as provided for in the Act on Payment Services. Lending in connection with payment services referred to in items d and e of point 22 of Article 3 and point 14 of Article 2 of the Act on Payment Services, if the conditions of paragraph 4 of Article 16 of the Act are met,  other activities and support services related to the issuance of electronic money or the provision of payment services referred to in item a, operation of payment systems according to the definition of the Act on Payment Services, other activities, unless they are restricted by this or other acts.

Act  No. 114/2021 (in Icelandic) on Payment Services implements the second directive of the European Union on Payment Services, Directive (EU) 2015/2366 (PSD2). The Act applies to all those who are licensed to provide payment services in addition to the provisions that apply to payment institutions.

Pay­ment ser­vices are defined in the Act as:

• Services enabling cash to be deposited to a payment account as well as all the operations required for operating a payment account.
• Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account
• Execution of payment transactions, including transfers of funds into and out of a payment account with the user's payment service provider or with another payment service provider:
• execution of direct debits, including one-off direct debits,
• execution of payment transactions using a payment card or similar device
• execution of credit transfers, including standing orders.
• Execution of payment transactions where the funds are covered by a credit line for a payment service user:
• execution of direct debits, including one-off direct debits,
• execution of payment transactions using a payment card or similar device
• execution of credit transfers, including standing orders.
• Issuing and/or acquiring of payment instruments.
• Money remittance
• Payment initiation.
• Account Information Services.

Ac­cord­ing to the Act, only those who have a li­cence to do so are au­thor­ised to provide a pay­ment ser­vice, and they are the fol­low­ing:

• Financial undertakings licensed to accept deposits or other repayable funds from the general public and to grant loans on own account, including branches thereof within the meaning of Act No 161/2002 on Financial Undertakings, where such branches are located in the European Economic Area, whether the head offices of those branches are located within or outside the European Economic Area in accordance with Article 47 of Directive 2013/36/EU and national law.
• Electronic money institutions in line with Act No 17/2013 on the Issuance and Handling of Electronic Money, including, in accordance with Article 34 of that Act, branches thereof, where such branches are located within the European Economic Area and their head offices are located outside the European Economic Area, in as far as the payment services provided by those branches are linked to the issuance of electronic money.
• Post office giro institutions which are entitled under national law to provide payment services.
• Payment institutions
• The European Central Bank and the central banks of the European Economic Area when not acting in their capacity as a public monetary authority.
• Public authorities if the payment services are not connected to their role as such.
• Payment institutions with limited authorisation.
• A legal or natural person benefiting from an exemption pursuant to Article 35.

Applications and conditions for a payment institution operating licence are governed by Chapter II of the Act. A payment institution is authorised to carry out the following activities, in addition to payment services:

• the operation of closely related support services, such as ensuring the execution of payments, currency transactions, measures for the safeguarding of assets and the storage and processing of data,
• operate a payment system,
• activities other than payment services in accordance with other applicable legislation.

Information regarding the application for an operating licence as a payment institution can be found at the bank's service portal under "Operating licence".

The Central Bank of Iceland supervises activites in accordance of the Act on Payment Services regarding entities subject to supervision, cf. Article 102 of the Act.

If a dispute arises regarding access to payment accounts pursuant to Article 37 of the Act on Payment Services or other provisions of the Act, a complaint can be sent to the Central Bank. When addressing complaints, the Central Bank follows the European Banking Authority's (EBA) Guidelines on complaint procedures (EBA/GL/2017/13).