Paypal might have higher fees, but you know exactly what they are. When you have a gateway and payment process and merchant account, you have fees for all those things. There's a fee for address verification that is not part of the discount rate. There are fees for declines. There's a fee if you credit someone back (Paypal returns the fee for that). There are usually monthly fees for a bank account and for payment gateway, plus usually there is a fee for the fraud detection on the gateway. There are batch fees for every time you settle and a fee for every chargeback, often even if you win it. Plus I have found that payment processors will do absolutely everything they can to cheat you and to lie to you and hoodwink you about EXACTLY what you are paying, to the point that the only way you really know exactly what you are paying with them is to subtract what turned up in your bank account from what the gateway says you processed. There are so many layers of blood sucking with a merchant account, payment gateway, and payment processor.
In contrast, you see exactly what Paypal takes up front, right on your account. There are no other fees. They don't even charge you a fee for a chargeback. The bad thing about them is if you get on their shirt list, they will cut you off and refuse to even speak to you, like you are in eighth grade. It is not business-like. And they will invent violations that do not exist in their rules. You can almost hear them tossing their hair as they flounce off in a huff.
So a merchant account is like a grifter, whereas Paypal is like immature teenaged girl.