Interchange is established to incent banks to issue payment cards and merchants to accept those cards. It is a small fee paid by a merchant?s bank (also know as the acquiring bank) to the cardholder?s bank (the issuing bank) and serves to compensate the issuing bank for a portion of the risks and costs it incurs to maintain cardholder accounts. These costs include finance costs for the interest-free period between the time a consumer makes a purchase and pays his/her bill, credit losses, fraud protection and processing costs. (Source:
www.mastercard.com/)