Iceland plans account-to-account alternative for merchant payments

Iceland's central bank is developing a domestic account-to-account payment system that would allow consumers to pay merchants directly from their bank accounts, providing an alternative to traditional card networks.

The initiative, outlined by Central Bank of Iceland Deputy Governor Tómas Brynjólfsson in a Nov. 3, 2026, address, is intended to strengthen payment-system resilience, encourage competition and reduce reliance on international card infrastructure.

Iceland already has a well-established system for instant transfers between individuals, but retail payments depend heavily on Visa and Mastercard. The proposed system would extend account-to-account capabilities to purchases at physical stores and online.

Shared infrastructure, competing services

Under the proposed arrangement, the central bank would facilitate a common payment scheme built on existing domestic instant-payment infrastructure. The system would establish shared operating rules, technical standards and interfaces connecting banks and payment service providers.

Consumers could initiate payments directly from their bank accounts at checkout, with merchants receiving immediate confirmation. The infrastructure would support payment requests and transfers without requiring transactions to travel through conventional card networks.

Banks and payment companies would remain responsible for developing customer-facing applications, merchant acceptance solutions and related services. They would compete on pricing, functionality and customer experience while using common infrastructure.

The central bank has begun a public procurement process for the core technology, although it has not announced an implementation timetable.

Implications for merchant acquiring

Industry observers have mentioned that for merchants, an additional payment channel could provide more choice in acceptance services and potentially reduce dependence on card-processing arrangements; for ISOs and other payment providers, shared infrastructure could create opportunities to develop account-based acceptance products without building separate underlying payment networks. The initiative could also introduce new competition in merchant pricing, payment routing and settlement services. However, actual costs, commercial arrangements and merchant adoption requirements have yet to be established.

The central bank emphasized that the goal is not to replace cards but to provide another reliable payment channel, particularly during disruptions affecting international networks.

Iceland is also preparing to join the Eurosystem's TARGET Instant Payment Settlement service, which is expected to support instant settlement in Icelandic krónur beginning in 2028. Together, the initiatives reflect a strategy of combining domestic payment infrastructure with international connectivity.

This development, analysts noted, illustrates how shared payment rails could support competing merchant services while reducing dependence on individual networks. Its commercial impact will depend on implementation, merchant acceptance and consumer adoption.

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