Central Bank of Iceland Proposes Shared A2A Infrastructure to End Retail Reliance on Foreign Card Networks
Central Bank of Iceland Proposes Shared A2A Infrastructure to End Retail Reliance on Foreign Card Networks #
Iceland’s central bank, Seðlabanki Íslands, has outlined a plan to build dedicated domestic account-to-account (A2A) payment infrastructure for retail transactions. The proposal is intended to reduce the country’s outsized dependence on internationally operated card networks and strengthen financial resilience.
According to reporting by TokenPost, the proposed system would allow consumers to pay merchants directly from their bank accounts, whether in physical stores, on websites, or in person-to-person transfers, an option Iceland currently lacks at the retail level. Under the model, the Central Bank would own and operate the shared infrastructure layer, setting operating standards and providing settlement, while commercial banks and payment service providers would build the customer-facing applications and merchant services. Payees would receive confirmation the moment a payment clears.
National security and economic resilience are the primary drivers. As Bloomberg reported earlier this year, more than 90% of all Icelandic retail payments are routed through Visa and Mastercard, both of which process those transactions abroad. Iceland’s international connectivity depends on four submarine data cables, meaning any disruption to those links, whether through cyberattack, physical damage, or geopolitical incident, could effectively paralyse the country’s payment system. Iceland’s National Security Council has been closely involved in driving the domestic payments agenda, and parliament has already passed the legal framework underpinning the initiative.
The cost of the current arrangement has also drawn scrutiny. Icelanders spent the equivalent of 1.25% of GDP on payment transmission in 2023, a figure that compares unfavourably with Sweden at around 0.93% and Norway at approximately 0.79%, according to Bloomberg’s data.
The domestic retail infrastructure plan is separate from a parallel international track. The European Central Bank and Seðlabanki Íslands signed an agreement in June 2026 for Iceland to join the Eurosystem’s TARGET Instant Payment Settlement (TIPS) system, which will allow the Icelandic króna to settle instant payments in central bank money. TIPS participation is targeted for the second half of 2028, though no final go-live date has been confirmed. No launch timeline has been announced for the new domestic retail system.
The Central Bank has already advertised for proposals and cost estimates for the centralised infrastructure, and work has separately begun on offline card-based payment capabilities to ensure transactions can proceed even if network connectivity is lost entirely.
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