The intermediation of money; people, undertakings, banks, companies...
Payment intermediation is the mediation of funds between two parties. It can be between companies, between an individual and a company, or between two individuals. Payment intermediation can take various forms. It can be done with banknotes and coins, payment cards or by transfer via online banking or a mobile banking app. The payment systems that financial institutions use to mediate payments are called financial market infrastructures.
What is the Central Bank's interbank system?
One of the roles of the Central Bank is to promote efficient and secure payment intermediation services in Iceland and abroad. In order for the Bank to fulfil this role, it owns and operates important financial market infrastructures. These include the Interbank Payment System, which is a central payment and settlement system. When transferring funds between banks, payments go through the Interbank System for settlement and from there to the participants. The Central Bank and all banks and savings banks are participants in the Interbank System, and the Central Bank guarantees settlements between them. If, for example, the seller and buyer of a product do not have a bank account at the same bank, the transaction will be settled through the Interbank System.
The Interbank System is divided into two components, the gross settlement component and the retail component. The gross settlement component handles payments of ISK 10 million or more that are transferred between two participants. The component also handles payments coming from securities settlement systems. The retail component handles settlements in amounts of less than ISK 10 million between two participants. A large portion of the payments that go through the retail component. of the Interbank System are payment card transactions and transactions from online banks and banking apps. Retail payments are settled in the retail component twice a day.