[klodolph]

That assumes that the cost is proportional to the number of transactions, and is completely uncorrelated to the size of the transaction, which doesn’t make any sense to me. Any costs due to risk will be larger for larger transactions.

[potamic]

Risk is almost always borne by the merchant or the bank, never the processor.

[crazygringo]

But only a small portion of the interchange fee goes to the credit card processor. Most of it goes to the bank.

How else do you think credit cards are able to do things like pay 2% rewards?

So the argument still holds. Banks hold more risk on larger transactions.