But will companies continue to run the risk of letting Paypal ban their accounts (and often, freeze their funds in the process)?

I can't imagine a consumer revolt, but at a certain point "makes your users feel secure" is outweighed by "makes you terrified you'll lose your money". I suspect that something like Stripe or Square will eventually sell companies on a "we won't screw you over" narrative and start to compete directly.

Probably. At this stage, the integration with PayPal is as much for the user's benefit as it is the company's (Stripe has an easier integration path, and is elegant from a back end perspective), and it isn't the customers concern that a supplier might have their account frozen. We're looking at this from a company/developer perspective, but that's not the driver for it any more.