Iceland is a small country, and with that comes a few advantages and disadvantages when looking at the development of the country’s FinTech ecosystem. As it is a wealthy nation, it is easier to foster innovation. Meanwhile, due to the small market and smallest money economy, it can become challenging to develop and run a FinTech company in Iceland.
Iceland’s FinTech development
Icelanders are said to have a high adoption rate towards new solutions in the financial industry. Consequently, in recent years, Iceland’s financial industry has changed and developed due to various FinTech solutions and new companies.
The three largest commercial banks in Iceland and other independent businesses provide multiple FinTech solutions. Online banking and online banking apps are the new norms. There are changes in consumer behavior due to introductions to new payment methods.
Now, Iceland has three major FinTech companies that continue the transformation of the financial industry in Iceland. These companies provide white-labeled digital banking solutions, AI-powered personal finance management solutions, consumer data analytics, transaction-based carbon insights, licensed e-money, digital wallets, next-generation social payment platforms, etc.
Iceland’s CBDC
In September 2018, the Central Bank of Iceland issued an interim report on Rafkróna — Iceland’s CBDC. It stated that rafkróna would not substitute entirely for physical cash but would be a supplement to it. The report discussed two ways of implementing the rafkróna: either as base money or as a registered, traceable deposit to a payment account with the Central Bank.
Recently, Iceland has made significant technological improvements and innovations regarding payment systems and infrastructures, putting the Central Bank of Iceland in a prominent position within the evolution of digital payment infrastructures. However, for now, we have to stay tuned for any news on the potential CBDC implementation.
Who regulates the industry?
Similar to other countries, there is a general financial regulatory framework. The Central Bank of Iceland has set up a specific Fintech Help Desk — an internal FinTech task force within the Financial Supervision Authority (FSA). It aims to support and promote communication with FinTech parties regarding law and regulations, as well as other issues or business-specific questions.
The FSA is the sole regulator in Iceland; however, certain aspects of the operations of FinTech companies may be subject to regulatory oversight by other parties or authorities. Iceland implements most of its legislation from the European Union, as it participates in the European Economic Area.
Sources:
Report: FinTech in Iceland
IBS intelligence
ICLG
Chambers and Partners
Central Bank of Iceland
CentralBanking
