A new interbank payment system will be brought into use in Iceland on the evening of Friday 23 October. A large share of the financial transfers undertaken by individuals and companies in Iceland — i.e., debit card transactions and regular transfers of funds — are routed through the system, which services banks and financial institutions. The system, which is owned by the Central Bank of Iceland, will take over the role of both the Central Bank’s real-time gross settlement system and the Greiðsluveitan netting system, also owned by the Bank.
The roles of the Central Bank’s new interbank payment system are to settle large-value payments (in amounts of 10 m.kr. or more) in real time, using banking institutions’ gross settlement accounts, and to net out retail payments (in amounts of less than 10 m.kr.) between banking institutions. The amounts thus netted out are then settled in gross settlement accounts twice every twenty-four hours (on business days).
Last year, the gross settlement system processed roughly 118,000 transfer orders amounting to 17 trillion krónur. The netting system processed just over 68 million transactions totalling slightly over 4 trillion krónur.
Preparation for the switch to the new interbank payment system has been underway since 2015. The system design was tendered out, and South African company Perago was selected. Perago is a subsidiary of Italian company SIA. Both companies have participated in developing parallel systems for the central banks in the Nordic region.
The project has been carried out in close cooperation with the Icelandic Banks’ Data Centre and Iceland’s commercial and savings banks.
The system is being renewed because the legacy systems are becoming outdated and need to be updated, as do other elements of payment intermediation in the Icelandic banking system. The objective of the new system is to retain the ability to intermediate domestic payments quickly, securely, and efficiently.
It is expected that the launch will be effected without incident, but as is often the case with changes of this type, some initial difficulties may arise, and if they do, every effort will be made to eliminate them as quickly as possible. Work groups representing the Central Bank of Iceland, the Icelandic Banks’ Data Centre, and the prospective users of the system will be on alert from before the launch begins on Friday evening until it is complete after the weekend.