The Central Bank of Iceland is exploring a new payments infrastructure that would enable account-to-account (A2A) payments for goods and services, as the country looks to modernize its payment systems and strengthen connections with the rest of Europe. Although Iceland is not a member of the EU, it has been seeking ways to better align its domestic payment processes with those of the continent.
Iceland’s payments landscape is already highly digital, but it remains heavily reliant on Visa and Mastercard. Tómas Brynjólfsson, Deputy Governor for Financial Stability at the Central Bank of Iceland, warned that depending on a small number of foreign providers could create vulnerabilities if those networks experience technological disruptions.
“Critically, domestic rails for debit card transactions that played an important role during the banking failures of the Global Financial Crisis have given way to foreign rails,” Brynjólfsson said at the Money Live Nordic Banking conference in Copenhagen. “Cash use is very low, and broadly adopted account-to-account solutions have not emerged as they have in many other countries in the region.”
Making Connections
The proposed scheme would establish shared technical standards and interfaces, allowing consumers to make payments directly from their bank accounts. Rather than replacing existing card networks, the A2A infrastructure would operate alongside the international payment systems.
The initiative also aligns with Iceland’s planned participation in the TARGET Instant Payment Settlement (TIPS) service, expected in the second half of 2028. TIPS is operated by the Eurosystem, which comprises the European Central Bank and the national central banks of euro-area countries. Iceland’s participation would mark another step toward closer integration with Europe’s payment infrastructure, despite remaining outside the EU.
Following Regional Models
TIPS operates around the clock, settling instant payments in euros, Swedish krona, and Danish krone. For Iceland to participate in its domestic currency, the Icelandic króna would also need to be added.
The country’s relationship with the EU remains a separate but related consideration. In August, Icelanders once again voted against pursuing EU membership, continuing a debate that has spanned more than a decade.
“Iceland is in a unique situation, existing outside the EU and geographically located in a complex area for connecting globally,” said Ben Danner, Senior Analyst of Debit at Javelin Strategy & Research. “Officials are seeing the successes of A2A domestic schemes from other countries and want to modernize their payment system towards digitalization. I also think it’s about modernizing their cross-border payment system as they plan to connect to the Eurosystem’s TIPS service.”
