The service charges paid by households for use of payment instruments fall into two categories: direct fees paid to issuers and service providers and indirect fees paid to acquirers for
payment card use at physical outlets. Households in Iceland paid an estimated 12.3 b.kr. in
direct service charges in 2022, including 6.5 b.kr. for use of domestic payment instruments
in Iceland and 5.8 b.kr. for use of domestic payment instruments abroad. In real terms, the
fees increased 4.7% year-on-year. Households also paid 14.4 m.kr. in indirect service charges,
which are fees paid by merchants directly to acquirers for payment card use. Merchants
recoup these fees through their product prices

In real terms, direct service charges increased by 13% for debit cards and 8% for credit cards,
owing to the rise in the general price level and increased overseas consumption. The per-transaction cost of using debit cards versus credit cards differs greatly, as has come to light in
earlier Central Bank analyses of the cost of retail payments. Each transaction using a domestic
debit card within Iceland costs households an average of 20 kr., as compared with 118 kr.
for use of a domestic debit card abroad. Each transaction using a domestic credit card within
Iceland costs an average of 51 kr., as compared with 177 kr. for use abroad. Households’ fees
for use of cash rose between years, while fees for payment services were virtually unchanged.

The vast majority of fees for overseas use of domestic payment cards takes the form of an
exchange rate premium. Households paid an estimated 4.4 b.kr. in such premia in 2022, or an
average of 138 kr. per transaction

Fees paid by merchants to payment service providers rose markedly between 2021 and 2022,
or around 23.5% in real terms, owing mainly to growth in credit card turnover and an increase
in the number of foreign payment card transactions. Each debit card transaction costs merchants 50 kr. and each credit card transaction around 142 kr.

In 2022, payment service providers earned an estimated 32.6 b.kr. in net revenues, an increase
of 37% year-on-year in real terms, mainly from payment card service charges.