Small merchants negotiate with Stripe for a flat fee to accept all cards. Big merchants negotiate with the networks and pay varying prices for varying rewards amounts (or however they get the deal structured).

Interestingly my flat fee with stripe is less than my reward rate on my credit card for some categories. It obviously is against the contract terms and probably considered fraud but I could theoretically make about 1.4-3 cents on the dollar (depending how you value points) by charging myself money.

This comes up in the article.

kinda, the article mentions that certain cards allow you on certain categories to get more than the interchange rate. what they don't mention in the article is that square charges the same fee to the business whatever kind of card is used, in this case whenever you use an amex card it's less profitable for square. If i were using a more traditional processor they may pass this cost on to me.

also milage reward points can hit as high as 2.3 cents per dollar so assuming i want to fly to japan with ANA i could in theory get 8.6c in value of MR points per 2.6c i charge myself. However i would not expect to get away with this and i'm sure square would figure this out.

He also mentions the possibility of adversarial collaboration, creating a scenario similar to yours…