Central Bank May Take Action Against Businesses Refusing Cash Payments

Central Bank Governor Ásgeir Jónsson has emphasised the urgency of improving domestic payment systems, calling it both a major consumer issue and a critical security concern, reports RÚV. He has not ruled out the possibility of the Central Bank taking action against businesses that refuse to accept cash.

“It is unacceptable that all payments in this country are processed abroad,” says Ásgeir Jónsson. He aims to collaborate with commercial banks to develop a domestic payment system. Furthermore, he finds it unacceptable that some stores are refusing cash payments. Icelandic payments solutions company Valitor was acquired by Israeli firm Rapyd under Asgeir’s watch.

Ásgeir stresses the importance of making the payment system more efficient, reducing costs and ensuring security.

“We are working as quickly as possible to establish an independent domestic payment system. The responsibility for this now lies with us, but progress has been slower than we would have liked. In my opinion, the cost of payment processing is far too high.”

Payment processing costs 54 billion ISK per year

The Central Bank has calculated that the total societal cost of payment processing in Iceland exceeds 54 billion ISK annually. Of this, households pay nearly 15 billion ISK in service fees each year. To put this into perspective, the estimated cost of constructing the new National University Hospital is 200 billion ISK.

In the fall, the Central Bank was granted additional authority to ensure payment security. The institution has long emphasised the need for an independent domestic payment system, but it has yet to be implemented.

Alongside efforts to establish a domestic payment system, the Central Bank Governor wants to ensure that people continue to have access to cash. During power outages or disruptions in international internet connections, ATMs will not function. However, cash withdrawals at bank branches may still be possible.

Ásgeir finds it unacceptable that the number of businesses refusing cash payments is increasing. He has not ruled out intervention by the Central Bank in this matter.

“It is crucial that cash remains a valid form of payment in this country — especially for essential goods such as food and fuel. Events abroad should serve as a strong incentive for us and the banks to resolve this issue,” he said.