NORWAY: An Introduction to FinTech Legal

Country Overview: Norway 

Norway is a technologically advanced country, where the primary contributor to GDP is the oil sector. The robust financial contributions from this industry have enabled Norway to eliminate national debt and establish one of the world's largest sovereign wealth funds.

Politically, the country is stable, with the Labour Party and the Conservative Party as its primary political forces, both occupying centrist stances. The current government has a centre-left orientation.

Norway's small and fairly homogenous population, along with high public trust in institutions, has facilitated the creation of a national digital infrastructure that is unparalleled in the financial sector by most other nations.

In recent years, Norway has seen a sharp increase in digital payments, accompanied by a notable decline in cash use. The advanced and efficient payment systems are key factors in this trend.

Various players in the Norwegian market, including industry groups like Finance Norway (Finans Norge) and the Finance Sector Union of Norway (Virke), as well as government agencies such as the Norwegian Tax Administration and the Consumer Council, advocate for a cash-free society.

A committee initiated by the Conservative Party has proposed the phasing out of legal tender with a goal of becoming cashless by 2030. However, this has met with some resistance. The Norwegian parliament, known as the Storting, aims to strengthen the existing cash system, and the Central Bank has voiced concerns about the transition to a cashless economy.

Historically, Norway's government has encouraged local financial institutions to develop and self-manage their own payment systems, including fund transfers and deposits. As a result, these institutions collaboratively launched BankAxept, a national electronic payment system that they co-own and operate. BankAxept enables money transfers between deposit accounts and serves as an alternative to international payment giants like Visa, Mastercard and American Express.

In the same vein, multiple Norwegian banks jointly developed Vipps, a mobile digital payment app that allows electronic transactions via smartphones and is compatible with various payment platforms. Currently, Vipps dominates Norway's mobile payment scene, boasting a user base that encompasses over 75% of the population. While competitors such as Apple Pay (introduced in June 2018) and Google Pay (launched in November 2018) vie for market share, Vipps has expanded its services through Telenor's mobile network. Furthermore, Norwegian banks have jointly crafted an electronic verification solution, called BankID. This system enjoys widespread adoption across the country, serving not only in electronic banking but also in accessing a range of services from public institutions and private corporations.

With the backing of government authorities, Norwegian banks have created and continue to refine a privately owned, self-regulated financial ecosystem that plays a crucial role in the country's financial infrastructure. BankAxept and BankID are so central to this system that they can be viewed as its cornerstone.

In July 2018, Vipps, BankAxept and BankID merged into a single entity. While the long-term effects of the merger on Norway's payment services and its consumers remain uncertain, the move clearly aimed to address the challenges posed by PSD2 and open banking.

Prospective entrants to Norway's payment services market should be aware of the considerable control that a few commercial banks have over the national financial infrastructure, giving them a competitive advantage in the fast-evolving payment services arena.

Although not part of the EU, Norway is an EEA member and is required to implement relevant EU regulations. PSD1 has been part of Norwegian law for close to a decade, and PSD2 has also been integrated; additional Regulatory Technical Standards, such as the SCA RTS, have also been adopted. A new Financial Agreement Act, which includes the remaining provisions of PSD2, came into effect on 1 January 2023. Numerous local actors are in the process of developing standard APIs to facilitate connections between AISPs and PISPs and various financial entities.

Key Nordic banks are considering the formation of “P27”, aiming to create the world's first unified region for both domestic and cross-border payments in diverse currencies. The Norwegian Central Bank is still undecided about supporting this pan-Nordic system. It has expressed reservations about surrendering national authority and the risks involved in disaster preparedness and cybersecurity.

Furthermore, the Norwegian Central Bank is assessing the advantages and drawbacks of issuing a digital central bank currency. Reports for Phases 1, 2 and 3 on this matter were published in May 2018, May 2019 and April 2021, respectively. The bank is currently in Phase 4, focusing on testing technical frameworks and evaluating their potential impact.

In recent years, the most significant trend in the Norwegian fintech sector is the “Buy Now, Pay Later” (BNPL) model. Swedish fintech company Klarna has emerged as the leading player in this area within the Norwegian market. It also worth noting that Norwegian fintech firms such as Signicat, Two, Meawallet, Firi, Exabel and Zwipe have gained international recognition over the last few years, but most of these firms are still in the early stages of growth. With growing concern over climate change, Norwegian fintech companies such as Climatepoint are increasingly focusing on sustainable investments and “green” financial products.

In addition, Norway has attracted cryptocurrency miners due to its low-cost hydroelectric power, tax incentives, stable political conditions and favourable climate for server cooling. However, the spike in electricity prices in 2022 and 2023, especially in southern Norway, casts doubt on the long-term viability of such ventures.