The Central Bank of Iceland is spearheading a new mobile payment app for smartphones to be introduced as early as fall of 2024, Heimildin reports. When up and running, the app should help lower prices and stabilise payment systems, according to Central Bank Deputy Governor Gunnar Jakobsson. Over 90 percent of transactions in Iceland are now made with payment cards.
Similar to apps in Denmark, Sweden and Poland
Icelandic financial institutions and the Central Bank have agreed on developing the peer-to-peer payment solution that would allow consumers to purchase goods and services without using the payment systems of VISA or Mastercard. The consumer could download this app to their phone and pay with a direct bank transfer. The service would be similar to MobilPay in Denmark, Swish in Sweden and Blik in Poland.
Prime Minister Katrín Jakobsdóttir is expected to introduce a bill requiring financial institutions to participate, which Alþingi will need to pass into law. The goal for the authorities is to increase the stability and security of payment systems in Iceland, with the possible side effect of bringing down costs of financial transactions in the country with a less expensive solution. As it stands, Icelanders spend more on credit card fees than their Nordic counterparts.
Market to dictate who benefits
Only two to three percent of payments in Iceland are concluded with cash payments, with the vast majority made with cards. Gunnar says that this split is unacceptable in the eyes of the Central Bank from a security standpoint. For example, a cyber attack on a service provider in November stopped payments for hours. He argues that a middle solution of simplified bank transfers would increase stability and also reduce the costs that consumers face for their everyday card use.
“It’s often hard to think of the whole picture, but if we manage to lower the cost of payment systems in the country, economics tell us that it should eventually lead to lower prices,” Gunnar told Heimildin. “Who benefits from lower prices, whether it will be the consumer or the provider of goods and services, is something that market competition will dictate.”