NORWAY: An Introduction

An Overview of Norway FinTech 

Norway is a technologically advanced society fuelled by the oil industry. Due to the annual contributions from the oil industry, Norway has no national debt and one of the world's largest sovereign wealth funds.

Politically, Norway is a stable country where the two biggest parties, the Labour Party and the Conservative Party, both are centrist parties. Currently, Norway has a centre-right government.

Being a small country with a relatively homogenous population and a high degree of trust in public institutions, Norway has been able develop national technologies that ensure an efficient digital infrastructure. This is particularly true as pertains to the financial infrastructure. The philosophy of the Norwegian authorities has been to leave it to the banks to develop and regulate systems for the transfer of funds among themselves. Consequently, Norwegian banks have co-developed a national electronic payment system that carries out the transfer of commercial bank money between deposit accounts.

Over the last few years, Norway has seen a steep rise in digital payments accompanied by a corresponding decrease in the use of physical cash. One might argue that the well-functioning, efficient and modern Norwegian payment infrastructure has been an integral factor in driving these developments.

A number of market participants are eager to completely remove cash from the economy and several industry organisations have come out in favour of the proposition, including Finance Norway (Finans Norge), The Finance Sector Union of Norway and the Enterprise Federation of Norway (Virke). The Norwegian Tax Administration and the Norwegian Consumer Council also support removing cash from the economy.

A committee appointed by the Norwegian Conservative party stated in an interview in 2017 that Norway should aim to become a cashless society by 2030. The committee proposes that the current right to pay with central bank notes and coins (legal tender) be abolished by 2020, followed by further steps to complete the transition and make Norway a cashless society by 2030.

The Norwegian legislative body, the "Storting" (the Norwegian parliament), on the other hand, has expressed a desire to strengthen the framework for cash payments.

Norwegian banks co-own and maintain this electronic payment system, called "BankAxept". BankAxept competes with other payment systems such as Visa, Mastercard and American Express.

Continuing the tradition of creating and developing their own payment infrastructure, a number of Norwegian banks have developed and today co-own Vipps, a digital payment solution/application for mobile devices that enables end-users to make payments electronically via their mobile devices, by accessing various payment systems (Vipps makes an electronic copy of your payment card and functions as a digital wallet). Vipps has no payment infrastructure of its own that can carry out the payment transactions. Thus, users of Vipps have to use either the Visa or MasterCard payment systems. However, Vipps has announced that end-users soon will be able to use Vipps to make payments by accessing the BankAxept payment system. Recently, Vipps introduced account-to-account payment that enables immediate transfer of funds from one bank account to another.

Currently, Vipps is by far the most widely used digital payment solution/application on Norwegian mobile devices. Vipps already has a user penetration of more than 75 per cent of the Norwegian population. Apple Pay was introduced in Norway in June 2018, and Google Pay was launched in November 2018. Both are direct competitors to Vipps, and at least Apple Pay is gaining traction in the Norwegian market. Also, PayPal's presence in the Norwegian market has increased lately.

In addition, Norwegian banks have co-developed an electronic authentication solution, BankID, which has become widely used in Norway, both in relation to electronic banking and in relation to services provided by various public institutions and private companies.

Norwegian banks have thus, with the blessing of the authorities, created, and continue to develop, a privately owned and self-regulated financial eco-system that constitutes a central part of the Norwegian financial infrastructure. BankAxept and BankID are so central to the Norwegian financial market that they must be said to form part of the backbone of the Norwegian financial infrastructure.

In July 2018 Vipps, BankAxept and BankID merged into one company. It is open to debate how this merger will impact the Norwegian payment services market and its users, but it is clear that the merger was a strategic response to the challenges posed by PSD2. Some of the big players in the Norwegian retail market have already complained that prices of the services provided by the merged entity have gone up.

Thus, potential entrants to the Norwegian market, in particular as relates to payment services, should be cognisant of the dominant position that a few commercial and privately owned actors, i.e. the commercial banks, hold over the Norwegian financial infrastructure; a position they can use as leverage when competing in the fast evolving payment services market.

Norway is not part of the EU, but as a member of the EEA (European Economic Area) it has agreed to implement most EU legislation. PSD1 has been part of Norwegian law for almost a decade. On 7 June 2019, the Norwegian Government (King in Council) resolved to authorise the EEA committee, in its 13 June meeting, to incorporate PSD2 (Directive 2015/2366/EU) into the EEA agreement. The public law part of PSD2 and the most important elements of the private law part of PSD2, however, already came into effect on 1 April 2019. The private law part of PSD2 that remains to be transposed into Norwegian law is expected to be transposed into Norwegian law sometime in 2020. This means that the third party services AIS and PIS now are regulated under Norwegian law, and that the Norwegian FSA is able to license such activities or handle notifications about third parties renderings such services cross-border into Norway.

The regulatory technical standard pertaining to SCA (Strong Customer Authentication) and the CSC (Secure Open Standards of Communication) entered into effect on 14 September 2019. On 23 October 2019, the Norwegian Financial Supervisory Authority (FSA) announced that card issuers, acquirers and e-commerce companies have until 31 December 2020 to implement SCA solutions for card payments relating to e-commerce.

There is currently great local interest in developing standard APIs for banks, AISPs and PISPs. Both EVRY and Nets are currently developing such APIs, among them APIs that seek to function as a gateway to the APIs of the individual banks.

Also, it should be noted that several major Nordic banks have agreed to investigate the possibility of establishing, within the Nordics, the world’s first integrated region for domestic and cross-border payments in multiple currencies through an open-access, common infrastructure that will deliver state-of-the-art payment experiences to customers across the Nordics. The project is called "P27" and aims to process the first transactions through the P27 service in 2020. Norwegian banks, such as DnB, have pulled out of the project for now, but the project organisation continues to meet with Finance Norway, the Central Bank of Norway and the Norwegian FSA. The Norwegian Central Bank is still undecided as to whether it would support the transition from a national payment infrastructure to a pan-Nordic payment infrastructure, as one could argue that to some extent Norway would cede national control of the payment infrastructure by implementing a pan-Nordic payment infrastructure. This, in turn, raises questions relating to disaster planning and cybersecurity.

The Norwegian Central Bank is also currently analysing whether issuing digital central bank money to the public would be beneficial to Norwegian society. A Phase 1 report on the subject was published in May 2018. The Phase 2 report was published on 27 June 2019. The Norwegian Central Bank is apparently closely following the Swedish Central Bank's "E-krona project" and the development of a test solution for a potential future e-krona.

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As a leading legal law firm within the FinTech space, Simonsen Vogt Wiig offers a wide range of services that combine our expertise within the financial regulatory sector with our longstanding top tier expertise within the tech space (TMT). We serve a wide range of Norwegian and international blue chip clients and start-ups. Typically, we advise on matters such as:

- payment services

- crowdfunding/crowdlending

 - card & payment schemes

- issuance of cryptocurrency/ICOs

- technological infrastructure (e.g. biometrical payment cards)

- mining of cryptocurrency

- operational issues such as: consumer protection, data privacy, cyber risk

- intellectual property

- general contractual negotiations