Icelanders have fully embraced the use of the Internet as an essential tool to conduct both business and personal transactions. Iceland’s established telecommunications and IT infrastructure presents a strong foundation to support a thriving e-commerce market. OECD recently reported that Iceland is a smaller member company that is rapidly expanding its electronic-commerce infrastructure. The market for Internet services in Iceland has grown significantly over the past couple of years, fueled by high rates of Internet access and a high-adoption rate of electronic payment systems. The country aspires to accelerate e-commerce through a multinational action plan with the European Union.

Iceland has some of the highest Web accessiblity and online usage in the world. More than 60% of homes are hooked up to the Web, “a world record”, says Iceland Telecom. In December of 1999, approximately 32% of adults in Iceland used the Internet weekly compared to 28% in the United States. Considering the rapid growth in Internet access over the past year, this number is likely to be substantially higher today in 2000. There has been a steep increase in the amount of e-commerce as well. In December of 1998 around 7% of people in Iceland were using the web for e-commerce. This number rose to 20.25% a year later in 1999. 
 

Types of Transactions

The B2C sector of online commerce in Iceland is very active. More than 35% of Iceland’s population claim to have shopped online. Icelanders are using the system to purchase everything from groceries to airline tickets. Online shopping can serve as a valuable resource for inhabitants on the outskirts of the main city who do not have access to many shopping centers to purchase goods.
 

B2C retailers who market to Iceland are fortunate in that the population is already very comfortable in purchasing goods electronically. According to Visa, Iceland is “leading the world towards a cashless society”. Currently, more than 90% of all transactions are conducted by electronic media. There are two main reasons for this. First, inhabitants display unusual enthusiasm for new technology. Second, the fraud rate stands at a mere 0.0003 percent of all transactions, against a world average of 0.07 percent.

The B2B community in Iceland is not as active in Iceland as in other neighboring countries. The primary reason for this is that the country depends on the fishing industry for the more than half of its GDP. B2B commerce is emerging within the fishing industry however, with several online companies offering fish auctions. One company, North Atlantic Solutions, is similar to FreeMarkets in that it gathers and disseminates information about fish supplies and pricing measures and brings together buyers and sellers. The company has an advanced computer system designed specifically for conducting fish auctions which also gathers sales and fee information, and settles buyers' and sellers' accounts. 
 

Methods of Accelerating e-commerce

Delegates in Iceland have pointed out that there are concerns arising from artificial barriers for e-commerce caused by differences in taxation systems between the EU and the European Free Trade Association, in which Iceland is a member. Officials are intent to establish measures to overcome any barriers of online trade between Iceland and the rest of Europe. In addition, Iceland has welcomed EU's e-Europe initiative and the Action Plan on e-commerce. The following details some of the initiatives planned to accelerate e-commerce: 

• Endorse alternative dispute resolution, trust marks and effective codes of conduct by working with stakeholders to develop general principles and by creating appropriate incentives.
• Establish a .eu top level domain name.
• Establish electronic marketplaces for public procurement, and adopt two Directives regarding Public Procurement incorporating provisions to remove legal obstacles to electronic procurement.
• Adoption of a Directive on Value Added Tax (VAT) on certain services supplied by electronic means to ensure compatibility of the EU VAT system with e-commerce, in particular to provide a level playing field for European content providers.19