Earlier quoted context omitted.
Interchange goes to Visa, MasterCard, et al not the issuing bank. This is their vig.
Sorry, no. Fees are paid to the issuing bank, acquiring bank, and network. The majority of it goes to the issuing bank, and that's the non-negotiable rate when you get a merchant account. That fee is known as the interchange fee. The processing fee is something you negotiate with your gateway and/or acquiring bank. I work in the industry; it's my job to know how this works. Here is an example from Wikipedia (bear in…
To address your point, I understand interchange as being set and collected by the card network, and is non-negotiable. Anything off the top is left for the banks to keep for themselves, e.g. the plus in "interchange plus" pricing). Another example assume a hypothetical interchange of 1.5% and a merchant that has a merchant account that costs 3.5% + 30¢ (gateway) per transaction. In this case the card network takes 1.5%, the gateway 30¢, and the banks 2%. Is this not how it works? It would be nice if you could cite something (not trying to be an ass in case it reads that way :).