Fintech
in Iceland
An Overview of the Fintech
Ecosystem in Iceland

FEBRUARY 2020

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Table of Contents
About the Report										4Purpose										4About The Fintech Cluster								4About Northstack									5SFF										5Fintech in Iceland									6What is Fintech?									6The Fintech Ecosystem Map							7Funding and Acquisitions									8Technology Development Fund							8Private Investment									8Notable Acquisitions								102019										12Profiles 										18Monerium										18GRID										18Lucinity										19Igloo										20Jiko										21Interviews										22Is there anything unique about Fintech in Iceland?						

22What are the biggest opportunities for Fintech in Iceland?					

23What are the biggest challenges for Fintech in Iceland?					24How has the Fintech community been doing, and how can it do even better?		

25

How well prepared is the government for the changes coming with Fintech?		

26

If you had a magic wand and you could change anything in the
Fintech ecosystem/environment, what would you change?				

27

What advice would you to people looking to start a Fintech company in Iceland?		

28

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

About the Report
PurposeThis report is a collaboration between The Icelandic Financial Services Association, Northstack andthe Icelandic Fintech Cluster. The goal of the report is to give an overview of the Icelandic Fintech
ecosystem, serve as an introduction to the community, and a calling card for those interested.
All data in the report is either from Northstack’s proprietary funding database, or from public sources,
like the Technology Development Fund.

About The Fintech Cluster
The Fintech Cluster is a society for those who work in Fintech andwant to increase value creation, competition, and living standards. It
was established in late 2018 and its purpose is to strengthen financial
innovation and simplify business.
The Fintech Cluster hosts various events, meetings, presentations, andcelebrations related to Fintech. It also enables the progress of Fintech inevery possible way, by connecting people and projects within Iceland andabroad.
The Fintech Cluster is a society that benefits it s members by sharing
knowledge, research, and development and marketing from each other.
It builds on the ideology that people working on similar things should beclose to each other to gain expertise and experience from each other.
This makes it easier to get capital, find co-workers, and find an entrance
to markets for new products.
The Fintech Cluster established an Innovation Center, open to membersof the Fintech Cluster, where companies work and host meetings andevents. The center has also been used by students when designing
software for members of the Fintech Cluster.
Further information can be found on www.fjartaekniklasinn.is.

5Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

About Northstack
Northstack is Iceland’s leading tech- and innovation-focused media andanalysis firm. Since 2015, Northstack has provided news coverage aswell as detailed analyses of the innovation ecosystem, venture capitaland public policy related to the space. Apart from its own reporting,Northstack also collaborates with other industry organisations to
conduct research and analysis.
The researchers who compiled this report are Dóróthea Ármann,
researcher at Northstack, and Kristinn Árni L. Hróbjartsson, founder ofNorthstack.
For further information: kristinn@northstack.is

SFF
This report is written with the support of SFF, The Icelandic Financial
Services Association.
Information can be found on www.sff.is.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Fintech in Iceland
What is Fintech?
The purpose of this report is to give an overview of the Fintech Ecosystem in Iceland. To do thatproperly, a definition of what is meant by “Fintech Ecosystem” needs to be in place.
What we refer to as the Fintech ecosystem includes all Fintech companies, like start-ups, that are
working on technology-based solutions to solve finance-related issues. It also includes incumbent
financial companies, like banks and insurers, many of whom are going through a digital transformation
with considerable investment in technology, both to simplify and automate internal processes as well as
create more convenient services. The ecosystem also includes the financial infrastructure that makes
the creation and digitization of financial products and services possible. Finally, there are supportingorganizations that might not create Fintech products, but rather focus on the growth of the Fintech
ecosystem and are therefore a necessary part of it.
In order to build a competitive Fintech industry in Iceland, a strong ecosystem is necessary. All these
aforementioned links inside the Fintech ecosystem work together in playing an important role in thechanges happening to our financial system and how we interact with money and finance.
With this report, we hope to provide a comprehensive overview and interesting discussion of the
Icelandic Fintech ecosystem. We created a map of the current players in the ecosystem. We compiled
highlights of interesting and important, newsworthy events for the sector and profile a few interesting
Fintech companies, all of whom have recently raised money and are active across borders. Finally, weinterviewed the following Fintech experts, to get their thoughts and views on the ecosystem and where
it’s headed:•		 Kristján Ingi Mikaelsson, Managing Director at Icelandic Blockchain Foundation•		 Kristrún Tinna Gunnarsdóttir, co-author of a white paper on the Icelandic financial sector, 				 currently Head of Strategy at Íslandsbanki•		 Danielle Neben, Marketing Director, ePassi Iceland Chinese Marketing and Payment Solutions•		 Kári Þór Rúnarsson, CEO & Co-founder of Authenteq

We thank them kindly for their help.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

The Fintech Ecosystem Map
The following map is an attempt to capture the Fintech ecosystem in Iceland. It’s comprehensive, but never exhaustive, asthat would be an almost impossible task. It shows the ecosystem at a glance, organized into types of products or services
provided. Companies that have a broad offering can be represented several times on the map.

Analytics, Reporting
and Scoring
Advania
Creditinfo
GRIDKóði (Keldan)
Registers Iceland
Statistics Iceland

Blockchain & Digital Assets
Auroracoin101
Monerium
Myntkaup
Nordic Art Association
RippleSkiptimynt (ISX)
Smileycoin
SvandisDebt Collection
Gjaldheimtan
InkassoMomentum
Motus

Recurring payments
and invoicing
Greiðslumiðlun
Konto
PaydayInsurance & InsurTech
Allianz
Creditinfo
Ekki banka
Klavier
Sjóvá
TM
Tryggð
VÍS
VissVörðurFintech Platforms &White Label Solutions
Code North
CreditinfoGreiðslumiðlun
MementoMenigaMonerium
Síminn Pay

Payments
Advania
Alein Pay
BorgunCentral Pay
DalpayePassi
FX Iceland
Handpoint
Jiko
Korta
Monerium
ValitorVerifone

Data Comparison
Aurbjörg
Herborg
ProcuraTwo birds
Factoring anddebt purchasing
A Faktoring
FaktoríaGreiðslumiðlun
Kríta

Accounting, Payroll, Financial Systems
Advania
Code North (Heartbeat)
DK Hugbúnaður
LS Retail
M7
Origo
PayAnalytics
PaydayRegla
Uniconta
Wise
Wealth Management,
Capital Markets & Investing
Akta
Algrím
ALM Verðbréf
Arctica Finance
Arev
Centra Corporate FinanceFossar Markets
GAMMA Capital ManagementÍslandssjóðir
Íslensk verðbréf
Íslenskir fjárfestarÍV Sjóðir
Júpíter rekstrarfélag
KóðiLandsbréf
Nasdaq Iceland
Nasdaq verðbréfamiðstöð
Rekstrarfélag Virðingar
Saxo Bank
Stefnir
Summa RekstrarfélagVerðbréfamiðstöð Íslands

Supporting Organisations
Icelandic Blockchain Foundation
Icelandic Financial Services Association
Icelandic Fintech Association
RU Center of Financial Technology
The Fintech Cluster

Credit & Lending
Arion banki
Aur app
BorgunFramtíðin
Greiðslumiðlun
Íslandsbanki
Krít
Kvika
Landsbankinn
Leiguskjól / Igloo
LykillNetgíróSíminn Pay
Savings Banks
ValitorCrowdfunding and Fintech
Enabled Marketplaces
Bókun
Computer vision
Drivers
Funderbeam
Karolina FundLeggjaMidi
Sköpunartorg
Tix
Tootprint

Banks & Digital Banking
Arion bankiindóÍslandsbanki
Jiko
Kvika
Landsbankinn
Savings banks
The Central Bank of Iceland

Venture Investments
Brunnur Ventures
Crowberry Capital
Eyrir Sprotar
Frumtak Ventures
Iceland Venture StudioInvesta
New Business Venture FundBanking & Fintech Infrastructure
Advania
Advania Data Centers
Creditinfo
Five DegreesGreiðsluveitan
Libra
Nordic API Gateway
Opin kerfi
OrigoRBSeðlabanki Íslands
Sensa
T PlúsLoyalty Systems
Arion banki (Einkaklúbburinn)
Icelandair Saga ClubÍslandsbanki (Fríða)Landsbankinn (Aukakrónur)Meniga (Kjördæmi)N1 Kortið
Púkk
Síminn Pay
Smartwallet
Personal Finance,
Savings, Pension Systems
Auður
Banki
Creditinfo
FuglarInit
Jiko
MenigaMount Gravy
Two Birds
Security & Regulatory
Advania Ísland (Signet)Auðkenni
Authenteq
DokobitLucinity
Origo
PIE systems
PII Guard
SyndisTaktikal
Mobile Wallets & Payments
Aur
Central Pay
ePassi
Kass
Kvitt
MementoNetgíróPei
Síminn Pay
Smartwallet
Splitti

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Funding and Acquisitions
In Iceland, the two main sources for funding of companies are either public – through theTechnology Development Fund – or private – through local and foreign investors, like angel
investors or venture capitalist funds.

Technology Development Fund
The Technology Development Fund (TDF) is a public institution, funding early stage
technology projects with grants from 1.5 to 70 million ISK ($10.000 to $530.000). The TDF
is a generalist fund, with a focus on technology development companies in general, whichmeans Fintech companies have to go through the same evaluation as every other company.
The TDF has increased significantly from 2016 and currently has around 2.5 billion ISK(more than $20m) to grant each year.
In the past two years, six Fintech companies have received a total of 76 million ($610.000)
ISK in grants from the TDF. In 2017, Fintech companies received around 40 million ISK($320.000) in total from TDF, accounting for approximately 1,7% of the total fund, and in
2018 Fintech companies received 35 million ISK ($280.000), around 1,4% of the total fund.
Fintech is not listed as a category or broken out specifically by the fund. This applies
both to projects that receive grants, and applications. Therefore, it is difficult to determine
whether Fintech companies have a hard time getting through the application process (lowacceptance rate) or whether few Fintech companies apply (low application rate). In any
case, there’s an opportunity for the Fintech sector to apply for and receive more grants fromthe TDF to fund early stage Fintech projects.

Private Investment
Iceland has four private VC funds and one government-backed fund. All invest in early-stage
technology startups. There’s also a small angel community that regularly invests incompanies in angel rounds or participate in bigger investment rounds led by funds.
Looking at investment activity, there’s been more than $52 million invested by local andforeign investors in Fintech startup companies in the last five years (2015 - 2019YTD).
These numbers are based on announced funding events and don’t include accelerator
funding.

9Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Amount invested in Fintech startup in USD
25,000,000
19,700,000
20,000,000

13,175,000

15,000,000
9,600,000
10,000,000

5,000,000

7,800,000

2,150,000

2015

2016

2017

2018

2019

There have been at least two investments in Fintech startups every year in the last five years, and in
2019 we already have five investments tracked.

Number of investments in Fintech startups
6

Number of investments

5

4

3

5
2

3
1

22

2

0
2015

2016

2017

2018

2019

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Even though the total amount invested is lower in 2019 than the peak year of 2016, the amount is still
healthy and spread across more companies, which suggests that the ecosystem is growing and that
activity is increasing.
Investors in these companies include local investors like Crowberry Capital and Brunnur Ventures,
strategic investors like Íslandsbanki (Icelandic bank) and Swedbank, and international investors like
Draper Associates, Blue Yard Capital, and Industrifonden.

Notable Acquisitions
In 2016, local IT company Advania acquired mobile payment upstart Pyngjan and rebranded as Advania
Mobile Pay. Terms remain undisclosed. Siminn later acquired and rebranded the product as Síminn Pay.
In July 2018, Dutch-Icelandic creator of core banking system Five Degrees acquired Icelandic Fintech
company Libra. The roughly fifty employees of Libra in Iceland joined forces with Five Degrees, which
also has operations in Iceland.
Meniga, one of Iceland’s flagship Fintech companies, acquired Stockholm-based reward platform
Wrapp in January 2019, merging the startups’ rewards program into Meniga’s own rewards program
development, which among other things, powers Fríða, Íslandsbanki’s rewards platform.
In September 2019, the second cross-border acquisition in the Fintech space happened, when global
blockchain company Ripple acquired local engineering company Algrím Consulting in an acquihire.
While pricing remains undisclosed, Ripple has stated they will build up operations in Iceland.

12Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Fintech Ecosystem News
2018
January

The Icelandic Fintech Association, a lobby group for Fintech in Iceland, wasfoundedThe Icelandic Fintech Association hosted its inaugural meeting in January
2018. The association represents Icelandic Fintech companies and protects
their interests and works as a driver for change and improvement in the financial
environment. Founding members were Aur, Framtíðin, Memento, Meniga, Kóðiand RB.

Meniga awarded Best of Show at Finovate
March

The Icelandic Fintech company Meniga was awarded Best of Show at theFinovate Fintech conference in London. The company previously received theaward in 2011, 2013 and 2015.

Swedbank invested in Meniga
April

Swedbank announced it had invested $3.7m in Meniga in a strategic financing
round, following a partnership agreement to launch Meniga’s digital banking
solutions across Swedbank’s markets.

UniCredit invested in Meniga
June

UniCredit signed a strategic partnership with Meniga as well as a EUR 3.1
million investment through UniCredit EVO (Equity Venture Opportunities).

Skiptimynt ehf licensed as a service provider
September

Skiptimynt, which runs the Icelandic exchange ISX.is, was licensed by the
Icelandic Financial Supervisory Authority (FME) as a service provider for virtual
currency, e-money and currency. ISX is the first Icelandic exchange market
offering exchanges of cryptocurrencies for Icelandic currency.

The Icelandic Fintech Cluster established
October

The Fintech Cluster was established in late October 2018, with 64 members.
Now the members are around 90, including financial- and Fintech companies,
as well as universities, law offices, institutions, and consultants.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

GRID closed a $1M angel round
October

GRID, a software company here to “Free the Spreadsheet,” closed a $1M angelround of funding. Investors were both local and international, institutions, andprivate individuals.

Landsbanki issues its card app
October

In October Landsbanki issued its card app for Android, making mobile paymentsof that kind possible for the first time in Iceland.

‘Mapping Icelandic Fintech’ conference hosted in Harpa
November

On November 1st, a seminar called ‘Mapping the Icelandic Fintech’ was hosted
in Harpa which aimed to give an overview of the Fintech industry in Iceland,and various speakers gave examples of the multiple aspects of the industry. In
addition, a map of the Icelandic Fintech Ecosystem was unveiled, showing thevarious fields of Fintech, making it easier to find colleagues and customers.

Íslandsbanki invested in Meniga
NovemberÍslandsbanki, one of Iceland’s “big three” banks, invested €3m in Meniga, roughly
ten years after Íslandsbanki became the Fintech startup’s first customer. The
funding round marked the third strategic funding round Meniga had raised in
2018.

German challenger bank N26 opened for customers from Iceland
Desember

DesemberN26, the German online bank, opened up for customers from Iceland. It serves
both individuals and companies. Banking accounts are in euros and customers
get debit Mastercards. Business is solely done online, so no actual offices wereopened.

The Fintech Center and Copenhagen Fintech Lab signed a cooperationagreement
In December 2018, the Fintech Center and Copenhagen Fintech Lab signed acooperation agreement which led to all of the Nordic Fintech clusters signinga cooperation agreement. This gives Icelandic companies support all over theNordic countries.

Reykjavik University established the RU Center of Financial technology
Desember

Reykjavík University established a Fintech research center, due to thefast-changing technology and working environment of financial services. RU’s
Fintech center is supposed to be a sandbox for students to try and develop
new projects in a safe environment. The projects are developed in collaboration
with the Icelandic working environment.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

2019
The Fintech Cluster introduced its operations to university students
January

In January 2019, a group of computer science students from Reykjavík University
and the University of Iceland visited the Fintech Cluster, where a couple ofmembers from the cluster explained their operations. Many students signed up
as interested in being a part of projects under the aegis of the Fintech Cluster.

Meniga acquired Wrapp
January

The Icelandic Fintech company Meniga announced the acquisition of Wrapp,a Stockholm based reward platform. The purchase price remains undisclosed,
all-stock, with maximum earnings totaling up to a 25% share in Meniga. Current
shareholders, including Scandinavia’s biggest bank Nordea, join Meniga’s
shareholders.

Authenteq announced $5m first close in a Series A round
January

The Reykjavik and Berlin-based identity verification startup Authenteq
announced a $5m first close in a Series A round. Draper Associates andcapital300 led the round. The company raised a $1.3m seed round a little overa year earlier. Authenteq has 21 employees working in their Berlin and Reykjavik
offices.

Monerium announced a $2m seed round
January

Monerium, the Icelandic Crypto Fintech startup, announced a $2m seed round
led by Icelandic VC fund Crowberry Capital. Also participating in the round were
blockchain company ConsenSys and Hof Holdings. In addition to a new funding
round, the company announced that it had applied to become a licensed
financial services company in the EEA.

Landsbankinn introduced a new developer website
February

In February, members of the Fintech industry were invited to the headquartersof Landsbankinn. Lilja Björk Einarsdóttir, CEO, introduced Landsbankinn’s new
developer website, developers.landsbankinn.is, where the online services ofLandsbankinn can be reached.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Funderbeam opened in Iceland
March

Estonian equity crowdfunding platform Funderbeam opened in Iceland,celebrating with an event co-hosted by the Fintech Cluster. FLOW meditationand Lava Cheese were the two first Icelandic companies to use the funding
platform.

The Fintech Cluster and Origo hosted an Artificial Intelligence seminar
March

Another seminar was hosted by the Fintech Cluster and Origo, where the topic
of discussion was Artificial Intelligence in Fintech. The seminar discussed themany solutions that exist for those who want to use artificial intelligence in
Fintech.

User Experience Design seminar at the Fintech cluster
March

The Fintech Cluster hosted a seminar on User Experience Design to emphasize
the need to take into account the different experiences of different people when
designing products.

GRID announced a $3.5 m seed funding round
March

GRID announced a $3.5m seed funding round, only five months after theirinitial $1m angel round. The funding round was led by Berlin-based Blue-Yard,
with participation from Slack Fund, Acquia Capital, and angel investor Charles
Songhurst. Previous investors, including Brunnur Ventures, also participated.

Valitor, along with Arion Bank and Landsbankinn, enabled Apple Pay in Iceland
May

May

Two of the Icelandic banks, Arion Bank and Landsbankinn, announced incollaboration with Valitor, that their customers can now connect their cards toApple Pay and therefore they can now pay for various products and services allover the world, as well as online.

RB and the Fintech Cluster hosted the conference “Is Iceland Big Enough for
the Banks of the Future?”
Reiknistofa Bankanna, which runs the core infrastructure of the Icelandicbanking system, invited the Fintech Cluster to co-host their annual spring
conference. The conference was called “Is Iceland Big Enough for the Banksof the Future?”

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Lucinity raised $2m in seed funding round
June

Lucinity, a startup working in the anti-money-laundering space, raised $2m tobuild their augmented intelligence anti-money-laundering solution. The seedround was led by Crowberry Capital, with participation from Preceptor Capitaland international angel investors.

Monerium became the world’s first crypto company to be granted an e-money
licenseJune

Monerium became the world’s first crypto company to be granted an e-money
license. It was approved to provide fiat payment services on a blockchain anduse it throughout the European Economic Area.

Íslandsbanki enabled Apple Pay
JulyÍslandsbanki adds the possibility to pay with Apple pay.

Landsbankinn introduced new A2A payment solutions

July

In July, Landsbankinn was the first Icelandic bank to offer access to an “accountto-account” (A2A) payment solutions. This enables Fintech companies toinstall software solutions (apps) enabling the bank’s customers to pay directlyfrom their accounts.

indó became a challenger to the “big three” Icelandic banks
September

The Icelandic Fintech company indó announced that they are to become thefirst challenger bank aimed at the Icelandic market. indó stated that in 2020,
they will offer customers current accounts fully insured by government bonds
and deposits in the central bank of Iceland. indó will offer current accounts
connected to the customer’s debit card, fully controlled from the customer’ssmartphone. Unlike in traditional banking operations, customer’s deposits will
only be lent out to the government.

Ripple acquired Algrím Consulting
September

The global blockchain company Ripple acquired Algrím Consulting for an
undisclosed amount. Following the acquisition, Ripple will open an office in
Iceland, with ambitions to grow its presence in Iceland.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

October

Ikea settled the world’s first invoices with smart contracts and licensed digital
cash
Nordic Store purchased goods from IKEA Iceland, by settling an e-invoice with
Monerium’s programmable digital cash, using Tradeshift’s platform and smart
contracts on the Ethereum blockchain. With the transaction, Monerium andTradeshift proved government-regulated, programmable e-money is ready formainstream markets.

The Fintech Cluster and the Icelandic Financial Services Association hosted a
symposium about the coming projects in Fintech
October

The seminar included 22 micro-presentations about the evolution of Fintech
and financial services in Iceland, as well as the upcoming projects of Fintech.
The purpose was to introduce the future of the Fintech and financial industry ina quick and fun way.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Five Profilesof Recent Startups
MoneriumMonerium is the first company in the world authorized toissue e-money on blockchains. It was founded in 2016 by Gísli
Kristjánsson, Hjörtur Hjartarson, Jón Helgi Egilsson, and Sveinn
Valfells. Monerium makes digital currency accessible, secure, andsimple to transact online. The first service offered by Monerium
is e-money on blockchains, ISK, USD, EUR, and GBP. Monerium
is located in Reykjavik with less than 20 employees. Further
information can be found on the company’s website monerium.
com

GRID
GRID is the new face of spreadsheets. GRID ehf is an Icelandic
limited liability company, founded in late 2018 by a group of web
software veterans and data enthusiasts. As a Software-as-aService (SaaS) startup, GRID empowers knowledge workers toturn their spreadsheets into beautiful, interactive web content leveraging their existing spreadsheet skills - and then securely
share with others. GRID’s mission is to empower people to thinkand communicate on the fly using data and numbers, as naturally
as they do with words and text. Right now, the team consists of 14
people, based in Reykjavik, Iceland. GRID is currently rolling out its
beta program to a sizable waiting list of spreadsheet enthusiasts.
Anyone is welcome to join the beta program by signing up on thecompany’s website: grid.is19
Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Lucinity
Lucinity is building a global brain for Anti-Money-Laundering
to protect its clients from organized crime. The company was
founded in 2018 by industry veteran Guðmundur Kristjansson, aformer Director, Compliance Surveillance Technology at Citigroup.
Lucinity‘s patent-pending technology enables customers to
improve compliance and their relationship with regulators, while
simultaneously saving money on AML operations. The results
are achieved with better detection and explanations of suspicious
money laundering activity, based on extensive regulatory research.
The innovative Case Manager is carefully designed for efficient
AML case investigation. Lucy, the embedded AI review coach, helps
AML teams by contextualizing information and suggesting actions.
Lucy is Lucinity‘s foundation for using Augmented Intelligence toincrease automation in AML, without sacrificing quality. Lucinity
has a strong research focus and currently has two patents pending
in the US. The first, Federated Learning, will enable financial
institutions to learn from each other without sharing data. The
second, Actor DNA, is a procedure around pseudonymized data
to be able to compare individuals without using any personallyidentifiable information (PII). Lucinity has high confidence thatthese innovations will prove groundbreaking in the fight againstmoney laundering and for wider applications. Now the Lucinity
team counts 12 employees with experience from leading vendors,
regulators, and financial firms such as Citi, Oracle, NICE Systems,
Goldman Sachs, and the FCA. The team operates out of Reykjavík
and New York.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Igloo
Igloo is an insurtech startup focused on insurance and financesolutions for the rental market. The company was founded in 2018
by Vignir Lydsson, CEO (economist and computer scientist) andVilhjalmur Kjartansson, who is a lawyer. Igloo’s flagship productis the deposit-free rental guarantee which enables tenants to rent
without being required to put down a security deposit. Insteadof paying thousands of dollars upfront, tenants pay monthly
premium or subscription fee, and hence broaden their choices ofsafe and better-quality housing. The company has already made asignificant impact on the rental guarantee industry in Iceland andis close to market saturation and dominance in a few quarters.
Igloo has six employees and is located in Reykjavik, Iceland. Igloo isalready planning its market entry into Scandinavia, the UK, Canada,and several states in the US. In Q4 2019, Igloo finished its seedfunding of $675,000 from Arion Bank in Iceland and already started
planning its series A round of $20m, which is scheduled in mid orlate 2020 for its US scaling. Igloo was a part of the fall group of
TINC 2019, an accelerator run by the Nordic Innovation House in
Palo Alto, located in the heart of Silicon Valley. During the program,the company grabbed the attention of a number of venture capital
firms and received useful information on its product-market fit
and the go-to-market strategy in the US. Currently, Igloo is selling
the product with the brand name Leiguskjól in Iceland. Further
information can be found on that brand’s website leiguskjol.is.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

Jiko
Jiko is an innovative financial institution that enables safe, liquid,
and rewarding features. It was founded in 2016 by Stephane
Lintner, Jeffrey Neuman, and Rocky Motwani. Jiko’s mission is
to build a scalable infrastructure that provides individuals withdirect, transparent services in everything from banking to personal
data management. They believe in the power of technology andintegrity to simplify the banking system and return financial control
to their users. Jiko has built a full-stack technology that allows
real-time movement from cash to high-yield U.S. Treasury Bills
and works closely with the U.S. regulators to be a fully compliant
partner with national banking and broker-dealer licences. The Jiko
spendable T-Bill experience is the first hub on a wider network tocome. Our team is committed to engineering new features that
support our core tenets of user privacy, safety, and control. Jiko islocated in San Francisco Bay Area, New York City, and Reykjavík(the Technology Hub and our largest office). Jiko’s team consistsof 22 individuals, with 12 members based in Reykjavík, where weare rapidly growing and hiring. Jiko just launched a Beta App thatis limited to 500 lucky testers and can only be accessed from the
US. However, the product will be opened up to other markets in thenear future, and there are 50.000 people on a waitlist to get a Jikoaccount. More information can be found at jiko.io.

22
Fintech in Iceland | An Overview of the Fintech Ecosystem in IcelandInterviews•

Kristján Ingi Mikaelsson, Managing Director at Icelandic Blockchain Foundation•

Kristrún Tinna Gunnarsdóttir, co-author of a white paper on the Icelandic financial sector,
currently Head of Strategy at Íslandsbanki•

Danielle Neben, Marketing Director, ePassi Iceland Chinese Marketing and Payment Solutions•

Kári Þór Rúnarsson, CEO & Co-founder of Authenteq

Is there anything unique about Fintech in Iceland?
Kristján: This might not be a popular opinion, but I think we have a unique position because of thehardship the nation had to face together after the financial crisis. The crisis made us develop a different
mindset and realize that the system we’re using is not the best one, because it’s still the same as
we used before the financial crisis and failed. Therefore, people are ready to accept the challenge tochange it. Also, the nation owns two out of the three banks that are here in Iceland. That’s a hopelessposition to be in, but also something we can try to utilize. We can try to take some technology leap andwork as a nation to push things faster than other countries can. Another unique thing about Icelandis that we are a wealthy nation, which is always beneficial for innovation. And then one last thing thatmakes Fintech in Iceland unique, which you won’t hear from anyone else, is that we’re so prioritized
to live in Iceland. All the smartest people in the world stop in Iceland. I’m attending meetings every
week where I’m talking to the most powerful people in the world, who are either just having a layover
in Reykjavík or who I met, and they were interested in me, just because I’m Icelandic. This is reallyvaluable, and we should use it as a strength.

Kristrún: We are clearly smaller and that makes it more difficult to be profitable or reach scale in thelocal market, but it also makes Iceland a perfect test bed for “network-effect” solutions that depend onhigh market penetration.

Danielle: I think because of the crisis, people needed to find other things to do, other opportunities.
Icelanders are tough but not necessarily planned, so they focus on execution. I think that’s what also
makes Icelanders good, they execute. Icelanders don’t wait around and try to plan everything. It can bea plus, it can be a minus, but I actually think it’s a really good plus. Icelanders have great opportunities
to study at top universities such as Harvard and Cambridge, build up their network, and they’re notafraid to do so. This opens so many doors. It’s in their nature; their personal networking is really good.

Kári: I only see the Fintech ecosystem in Iceland from the outside, because our company’s focus ismainly on foreign markets. But from the outside, the uniqueness of Iceland is the small environment
it operates in and therefore the short channels. It is easy to reach people and influencers when theenvironment is so small. Additionally, with such a small country, the government administration should
be simpler and easier to make digital, taking Estonia as an example. However, I do not know if this is thecase in Iceland yet.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

What are the biggest opportunities for Fintech in Iceland?
Kristján: Fintech is an ingenuity sector which doesn’t require any natural resources. We are justusing human resources, and here in Iceland, we have a lot of ingenuity, especially in programmingand the financial sector. We should be focusing on the industries in Iceland that are strong. There areopportunities in building core infrastructures, for example, to issue eMoney via Blockchain or help
insurance companies to have their contracts available all over the world and so on.

Kristrún: I think the Fintech wave is driven by changing customer expectations. New technology
creates new opportunities, but it’s also vital to take an approach based on the customer’s point of viewand listen to the customer’s demand. Also, Iceland is such a small country, so things often spreadincredibly fast, which makes it a great test market for new products.

Danielle: If I knew, I’d be doing it! There are opportunities for the banks because they have fast decision
making compared to bigger banks in Europe. They could try something out here and sell it abroad. Try
to find an opportunity and sell banking as a service abroad, not just lending on their balance sheets.
That is, how to do things differently in order to increase the value to the customers. Also, Iceland is
one of the most digital countries in the world. People being so digital creates many opportunities.
For example, with Blockchain in the government; we all have a social security number, and it should
be relatively easy, and we could do it quite quickly. Why do we still need so much paperwork andcertificates for residential/business properties or vehicles, when this could all be put on the Blockchain?

Kári: The opportunities are connected to the uniqueness of Fintech in Iceland. We’re in a position todevelop things here that are hard to do elsewhere, because of the size of the country and the shortchannels.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

What are the biggest challenges for Fintech in Iceland?

Kristján: There are several challenges for Fintech in Iceland. First and foremost, it’s the Icelandic krona.
It’s quite challenging to run a Fintech company in the smallest money economy in the world. Secondly,salaries in Iceland are incredibly high. It’s difficult to justify a big development in Iceland when you
can get the same talent elsewhere. The third challenge is the same one as many start-up sectors arefighting; getting foreign specialists to Iceland. Fintech is serving the whole world, and we can’t just be
Icelanders in Iceland, creating solutions for the entire world, we have to get foreign human capital tohelp us. The slowness of the government implementing directives from the European Union is making
things difficult. Lastly, the government lacks a strategy. We don’t require some great regulations yet;
we just need declarations that we are going to be a Fintech country or that we are going to support
innovation in this sector. This doesn’t require a lot of work, just solidarity, and courage.

Kristrún: The biggest challenge for Fintech in Iceland is how small the market is. Even though you’re
doing business with the whole population, it’s still tiny compared to AliPay’s 1.2 billion users. The
Icelandic krona and “special Icelandic solutions” and regulation also create a barrier to entry.

Danielle: I think the biggest challenge is that Iceland is small, and you need to be international fromday one. It’s really hard to just think of Iceland as a target market. It’s good to test, but it’s reallyhomogeneous here, you need to get out. Icelanders are used to networking within their personal
networks; they need to learn how to reach out outside of these networks. In terms of funding, thefunding is ok with the angel investors, but when you get into the Series A round, it’s tough. I think there’sa real gap here in the market to be able to go to the next level. Also, funding is difficult because of therisk of funding in the Icelandic krona.

Kári: The biggest challenge is that few investors in Iceland have experience and industry knowledge in
Fintech to mentor others and help startups based on their own experience. This is natural and largely
because of the small size of the country. Also, Iceland is so far away from the big markets abroad,which makes it difficult for Icelanders to network overseas or benefit from the selection of meetups andsmaller events that larger Fintech hubs benefit from - although we can jump on a plane for a 2-3 day
event, you won’t go to London for 2 hour events that happen throughout the week all over the city.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

How has the Fintech community been doing, and how can it doeven better?

Kristján: The Fintech Cluster has been doing an incredible job. We’ve been seeing big events which areconnecting the old ways of doing things to the new ones. We are on a great path. I don’t really knowwhat to do differently except for just keep pushing the government and require regulations to be done tolower the power of the banks.

Kristrún: Many exciting things are going on and there are several interesting Fintech companies. In myview the local Fintech Cluster has been doing great things, hosting successful events and meetings.
The Icelandic Blockchain Foundation has also been proactive and provided useful and constructive
input into the discussion. In Iceland we tend to believe we need “special Icelandic solutions” which is not
helpful in a global marketplace. Uncertainty and delays in implementation of for example PSD2 can hurt
Fintech companies that are reliant on those regulations for their business models to work. I think that’sa real challenge.

Danielle: It’s a tough market; it’s so small here. But to be honest, I’ve been really impressed. The Fintech
Cluster has been doing a great job in such a short time, and I’ve heard that people are pleased about itin general. They’ve been very proactive and professional in the last year: setting up the facilities, hosting
events with the Icelandic Financial Services Association, and showcasing the various companies during
investor roadshows and international events such as Slush.

Kári: The Fintech Cluster is a great driving force. I wouldn’t know about half of the Fintech companies
that exists, if it wouldn’t be for the Fintech Cluster. The Fintech Cluster has been increasing knowledge
and networking inside the Fintech ecosystem, which is of course great. It’s always good to expand the
network of contacts. However, it would be good to see more networking across countries. It’s difficult
for Icelanders to network abroad because we’re so far away from other countries.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

How well prepared is the government for the changes comingwith Fintech?
Kristján: The government has started making some changes, for example, in technical infrastructures.
We are seeing strategy changes and changes in plans, but we need more direct actions. We needa clearer vision, strategy, and action from the government. However, it is difficult to turn an aircraft
carrier, even just a few degrees. But I think, since we’re such a small country, that we can just skip a few
phases and go straight into the next chapter. If we make mistakes, it’s easy to go back and do things
like everyone else. If we’d take the step to move our infrastructures to the form people are using in this
sector, for example Blockchain, we’d have a substantial competitive advantage. It’s difficult to run a
Fintech company if one of your employee’s job role is to stand in the queue at the district magistrate.

Kristrún: I think it’s extremely important that the government sees Fintech as an opportunity and achance to enable more efficient and effective banking- and financial services in a way that will benefit
the consumer.

Danielle: The Financial Supervisory Authority (FME) is fairly proactive. It’s very open and helpful; theytell things like they are. They’re really supportive. So in terms of regulators, it’s excellent. In terms ofcosts, like RB (Reiknistofa Bankanna), I think the structure is really much in favor of the big banks, somaybe that’s a challenge for smaller Fintechs. Even though RB is not a government institution, they
are the core of all the banks in Iceland. The government itself through Rannís have various grants thatcompanies can apply for - but they need to be quite proactive on that front. I don’t know if they could be
more proactive in letting people know about these grants. The government is trying its best to digitize
itself more, I know there’s been a lot of talk about how to better digitize the government, there are a lotof opportunities there.

Kári: Since Authenteq is mainly operating abroad, I haven’t given this much thought. However, it seems
that Iceland is often late to adopt EU regulation, which makes it difficult for Icelandic startups that may
look at Iceland as a test market or starting market, as there isn’t the same sense of urgency here as
abroad (mainly thinking about GDPR and PSD2 here).

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

If you had a magic wand and you could change anything in the
Fintech ecosystem/environment, what would you change?
Kristján: I’d definitely change the mindset that the government controls, that is, to not be so afraid ofchange and don’t push so much back when people are trying to create change. I’d make it easier forsmall companies to start up business and go through all these heavy regulations in Iceland. I’d change
our currency, open up for foreign specialists to come work in Iceland, and I’d like to see more courage.
We just need to dare to do things, why not? This is just people using their brains to create something,
and we can always back out from things.

Kristrún: I really believe in collaboration and teamwork. Financial services have broken down into
smaller units where Fintech companies are really specialized. I think we’ll see re-bundling wherethese small units will reunite and create a more holistic product offering. So, I think with the increased
collaboration we can create platforms and ecosystems that are stronger than what individualcompanies can create on their own.

Danielle: Get the banks to cooperate more with the Fintechs and be more transparent. Fintechs canbring a lot of good value to the banks; they bring in creativity and innovation. Banks, here and abroad,take so long to decide that it can be detrimental to the Fintechs. The Fintechs need access to the banks
in terms of distribution to their client platforms. The banks need to act better towards the Fintech
community in general. They’re so powerful, they have the balance sheet, but lack the innovation andexecution needed from the startups. They can also be really slow to make decisions in working withFintechs, that really impacts them. Fintechs are startups, and if Fintechs are looking to work with thebanks, then it’s challenging. On the other hand, the Fintechs have the opportunity to focus on nicheareas to service clients directly (B2C) where they can execute better better than the banks. We haveseen this with Monzo and Revolut. For banks to survive, they need to bring innovation and execution
into the Bank and better manage their relationships with the Fintechs.

Kári: We need more investors focusing on Fintech, but for now there’s nothing we can do about it. It’s
only limitation for now, it can change through time.

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Fintech in Iceland | An Overview of the Fintech Ecosystem in Iceland

What advice would you to people looking to start a Fintech
company in Iceland?

Kristján: Talk to as many people as they can. The Fintech sector is known for companies being helpful
and supportive of each other. Talk to the Fintech Cluster, the Fintech Foundation in Reykjavík University,and use the infrastructure that already exists in Fintech. Also, don’t be afraid to go abroad, seek out
relevant conferences, and get to know the Fintech industry elsewhere.

Kristrún: My advice is to begin by thinking about the customer and try to solve some daily pain-points
customers struggle with. Do not just look at the technology and think about what’s possible to create.

Danielle: It’s all about execution. What startups can do is execution. When you focus on something,
you can just execute. This is what it’s all about. Get some good key investors, have a minimum viable
product, don’t try to have all the bells and whistles. Get to the crossing lines so you can get your license,
get your case studies. Keep things really, really simple and execute, execute, execute.

Kári: Apply for grants at the TDF, it’s a great springboard for startups. Also, just dive into the ecosystem,
go to the seminars and networking events, meet people and get started.