You may have yet to activate your card, or your contactless limit has been reached. You then need to use your PIN once and after that you can pay with a contactless method.
The contactless limit for the plastic card is 6,000 ISK in a single transaction and 15,000 ISK since the PIN number was last used for payment. The same limits apply both domestically and abroad.
Remember to check and confirm that your card is enabled for contactless payments.