Iceland's A2A Payments Plan: A Challenge to Visa and Mastercard?

Michael Johnson · 2026-11-05

Iceland is taking a serious look at how people pay for things. The Central Bank of Iceland is exploring a new system that would let you pay directly from your bank account to someone else's—no cards needed. This is called account-to-account, or A2A, payments. The goal? Modernize the country's payment infrastructure and strengthen ties with Europe, even though Iceland isn't an EU member. ### Why Iceland Is Rethinking Payments Iceland's payment landscape is already quite digital. Most people barely use cash. But here's the catch: the country relies heavily on Visa and Mastercard. Tómas Brynjólfsson, Deputy Governor for Financial Stability at the Central Bank of Iceland, warned that depending on a few foreign providers could be risky. If those networks go down, Iceland could face major 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." In other words, Iceland used to have its own debit card infrastructure, but now it's mostly dependent on international networks. That's a vulnerability the central bank wants to address. ### How the Proposed A2A System Would Work The proposed scheme would set up shared technical standards and interfaces. This would allow consumers to make payments directly from their bank accounts. Importantly, it wouldn't replace Visa and Mastercard; instead, it would operate alongside them. Think of it as adding another lane on the highway—more options, more resilience. The A2A system would also align with Iceland's planned participation in the TARGET Instant Payment Settlement (TIPS) service, expected in the second half of 2028. TIPS is run by the Eurosystem, which includes the European Central Bank and the national central banks of euro-area countries. Joining TIPS would be another step toward closer integration with Europe's payment infrastructure, despite Iceland staying outside the EU. ### Learning from Neighbors TIPS operates around the clock, settling instant payments in euros, Swedish krona, and Danish krone. For Iceland to participate using its own currency, the Icelandic króna would need to be added to the system. Iceland's relationship with the EU is a separate but related issue. 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." ### What This Means for Businesses For businesses in Iceland, this could mean more payment options and potentially lower fees. A2A payments often cost less than card transactions because they bypass the card networks. For consumers, it could mean faster, more direct payments—no need to enter card details everywhere. But it's not just about convenience. A domestic A2A system would give Iceland more control over its payment infrastructure. If foreign networks face issues, domestic payments could continue uninterrupted. That's a big deal for resilience. ### The Road Ahead The central bank's exploration is still in early stages. There are technical, regulatory, and operational details to work out. But the direction is clear: Iceland wants a payment system that's modern, resilient, and better connected to Europe. Whether that means a full-fledged A2A system or just better integration with TIPS, change is coming. For now, businesses and consumers should keep an eye on how this develops. If Iceland succeeds, it could serve as a model for other small countries looking to reduce reliance on global card networks while still staying connected.