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Merchants certainly "notice" and take any opportunity to use an alternative to the card networks. They only accept it because they must to avoid losing a purchase. They would rather customers pay in almost any other form due to interchange costs.

When talking to big merchants about any new payment product, the first question you will hear is often "so, how does this lower my interchange cost?"

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That might be true, but it isn't as obviously true as you would think. Credit cards payments are not subject to being stolen or lost. Once you have the approval the money will reach your account.

Of course there are other frauds you are vulnerable to. Which is why it isn't clear what is really best

There are plenty of other payment methods than cash that have guards against being lost/stolen or the other problems with handling cash, but also dont have the high cost of interchange that funds credit card rewards.

Merchants take credit cards to avoid losing a purchase. Cards have such a high volume that consumers expect it and some small portion will skip a purchase if its not an option. But merchants would much prefer you pay with a store card, debit card or one of many other payment methods that dont have the same (2-3%) cost that credit cards do.

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