Iceland's central bank plans to help create a shared payment scheme linking bank accounts to reduce reliance on global card networks, the central bank said in a speech published Nov. 3 by the Bank for International Settlements.
The proposed scheme would give households and merchants another way to pay in a country where purchases rely almost entirely on Visa and Mastercard networks, the central bank said. The speech was titled “A new payment scheme for Iceland - building a sovereign and secure payment system”.
The central bank said Iceland already has instant bank transfers, but lacks a domestic card scheme or a widely used alternative for retail purchases. Its focus is on payments from consumers to businesses, since transfers between individuals have worked successfully for decades.
Under the proposed scheme, consumers could pay directly from bank accounts in shops, online or between individuals, with recipients receiving immediate confirmation, the central bank said. Common rules and technical connections would link banks and payment providers to existing infrastructure.
Banks and payment firms would provide applications and merchant services, competing on price and functionality, the central bank said. It has begun public procurement for the core system.
The central bank said cards would continue to play an important role. It is also working to allow offline card and contactless payments to strengthen existing networks during disruptions.
The plans reflect risks from dependence on a few providers, shared technology and uninterrupted digital connections, the central bank said. Critical services operate outside Icelandic jurisdiction, while subsea cables carry much of its communication with other countries.
The central bank said it had identified seven critical services and assessed their risks. It still needs to establish who requires continued access, how quickly services must recover and how long they must operate during disruption.
A financial infrastructure incident centre established earlier this year provides monitoring around the clock, with participation across the financial system, the central bank said. It has also strengthened its internal arrangements for managing crises.
Alongside the domestic scheme, Iceland plans to join the Eurosystem's TIPS service, which settles instant payments on shared European infrastructure, the central bank said. Participation would allow payments in Icelandic kronur to settle through that system.
The central bank is working towards readiness in the second half of 2028, but has set no final launch date. The timetable is ambitious and depends on close cooperation with domestic and European partners.
Shared European infrastructure would change Iceland's vulnerabilities rather than remove them, the central bank said. It intends to retain local backup capability for critical functions if external connections fail, while Iceland strengthens cable capacity and satellite backup.
The central bank said international cooperation and domestic capabilities must work together. Common European infrastructure alone would not give households and merchants an everyday retail alternative with basic infrastructure under Icelandic jurisdiction.
