Is he giving a significant discount for Bitcoin payment? On one side merchants complains that they pay fee and get charge back with cards but on the other give no discount or even use third party for Bitcoin payments that charge 1-2% on user + have horrible exchange rate.

When I get no fee and no margin on exchange rate I always pay in BTC, but I still loose as I have fee for buying BTC and miss on 1% cashback on my card. 3 to 5% discount should motivate most people with bitcoins to pay in BTC.