NORWAY: An Introduction to FinTech Legal

Norway is a technologically advanced society where the oil industry is the most important contributor to the gross domestic product. Due to the annual contributions from the oil industry, Norway has no national debt and has one of the world's largest sovereign wealth funds.

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

Being a small country with a relatively homogeneous population and a high degree of trust in public institutions, Norway has been able to develop a national digital infrastructure that is matched by few countries. This is particularly true as pertains to the financial infrastructure.

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 a key factor in these developments.

A number of market participants in Norway are eager to remove cash from the economy completely. Several industry organisations have come out in favour of this proposition, including Finance Norway (FinansNorge), 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. The Norwegian Central Bank has also expressed scepticism with respect to removing cash from the economy

Norwegian authorities have encouraged Norwegian financial institutions to develop and self-regulate systems for the transfer of funds (hereunder deposits) among themselves. Norwegian financial institutions have responded to this by co-developing a national electronic payment system that carries out the transfer of commercial bank money between deposit accounts. The 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, developing and maintaining the 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, in essence, makes an electronic copy of your payment card). 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% 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. Vipps has ventured into the mobile market in order to offer its customers mobile services by using Telenor's mobile network.

Additionally, 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 and maintain, a privately owned and self-regulated financial ecosystem that constitutes a central part of the Norwegian financial infrastructure. BankAxept and BankID are central to the Norwegian financial market to such an extent that they may be deemed 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 the merger long-term 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 and open banking.

Thus, potential entrants to the Norwegian market, in particular as relates to payment services, should be cognisant of the strong grip that a few commercial and privately owned actors, i.e. the commercial banks, hold over the Norwegian financial infrastructure, a position these actors 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 is obligated to implement EU legislation that is incorporated into the EEA agreement. PSD1 has been part of Norwegian law for almost a decade, and most of PSD2 has been transposed into Norwegian law. The relevant RTSs (among them the SCA RTS) have also been implemented into Norwegian law. A new Financial Agreement Act implementing the finals parts of PSD2 into Norwegian law is expected to enter into force sometime during the first half of 2022. There is currently great local interest in using the opportunities that PSD2 provides, and numerous local actors are busy developing standard-APIs for AISPs and PISPs, for onward connection to the various financial institutions.

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". The Norwegian Central Bank is still undecided as to whether to support the transition from a national payment infrastructure to a pan-Nordic payment infrastructure, as one could argue that to some extent Norway would recede 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. A Phase 2 report was published in May 2019, and a Phase 3 report was published in April 2021.

The most important trend that has emerged within the FinTech sector during the last year or two is "Buy Now, Pay Later" (BNPL). Klarna, the Swedish FinTech, is the most prominent player in the Norwegian market in this repsect.

On a final note, it should be mentioned that cryptocurrency miners have been moving into Norway over the last few years to take advantage of cheap hydro-electric power (the mining centres are eligible for tax breaks given to power intensive industries) and low temperatures, to power and cool their servers.

As a leading legal service provider within the FinTech space, Simonsen Vogt Wiig offers a legal services on a wide range of sector specific issues, combining our expertise within the financial regulatory sector with our longstanding tier 1 expertise within the tech space (TMT). We serve a range of blue-chip clients, both Norwegian and international, as well a slew of fledgling start-up companies. Issues that we advise on include:

- payment services
- lending activity (including BNPL)
- crowdfunding/crowdlending
- card schemes
- issuance of cryptocurrency/ICOs
- technological infrastructure (amongst others biometrical payment cards)
- mining of cryptocurrency - operational issues such as: consumer protection, data privacy, cyber risk
- intellectual property
- general contractual negotiations