Payments 2025

Intermediation of payments plays a key role in Iceland’s economic activity, as it enables individuals, companies, and the public sector to conduct financial transactions among themselves. The Central Bank is required by law to promote a safe and effective financial system, including domestic and cross-border payment intermediation. With an eye to this, the Bank places emphasis on closely monitoring payment infrastructure that is important for financial system security and financial stability. According to the Central Bank’s published policy, financial market infrastructure falls into three categories: systemically important financial market infrastructure, core infrastructure, and other financial market infrastructure. The Bank will continue to maintain comprehensive oversight of systemically important financial market infrastructure, but with the advent of this policy, it will also focus on core payment infrastructure. In all significant aspects, this oversight will be based on international benchmarks and standards.

For the most part, payment intermediation in Iceland is carried out digitally, as payment cards and electronic transfers are the most commonly used payment instruments. In general, operation of payment systems has run smoothly in the recent past, and disruptions to payments and securities settlement are infrequent. The Central Bank’s interbank payment system is currently being appraised with reference to the benchmarks in the BIS/IOSCO Core Principles for Financial Market Infrastructures (PFMI). The appraisal is set for completion before the end of 2025.

Operational risk in payment intermediation is on the rise, owing to technological innovation, an increase in attempted cyberattacks and cyberfraud, and other causes. The Bank has placed stronger emphasis on operational security and resilience of payment intermediation, partly in response to growing cyberthreats and elevated geopolitical risks. In cooperation with deposit institutions, the Central Bank has been working towards the introduction of a centralised infrastructure for payment requests, which would be independent of both foreign ownership and foreign infrastructure. With a smartphone app, users of the system would be able to remit payment to merchants and service providers. In order to bolster resilience, the Bank has also been examining a solution that would enable card-based payments at physical outlets even without an internet connection. Further harmonisation of responses and communications among public entities must continue, especially in cases of emergency.

The Central Bank keeps close watch on international developments in payment intermediation and financial market infrastructure, so as to promote further advancement in Iceland and to ensure best practice. The aim is to enhance efficiency and security in the financial system, thereby contributing to financial stability. The Bank has signed a letter of intent with the European Central Bank (ECB) on the possibility of using the ECB’s TARGET (T2 and TIPS) systems in Iceland. A feasibility assessment is currently underway, with a focus on analysing how the TARGET systems could bolster the resilience and security of payment intermediation in Iceland. The letter of intent does not oblige the Central Bank to use the systems. The feasibility assessment of TIPS is expected to conclude in autumn 2025. The next steps will be decided once it is complete.