The fraud protection of credit cards mostly comes out of the pockets of the merchant, I think? So the merchant could give people a discount for using means of payment without a chargeback, like cash.

You are right about the actual credit. Though eg in Germany people usually use their overdraft in a same way that American seem to be using their credit cards for short term credit.

(For either convenience is the main selling point. The fees and interest rates for overdraft and credit card debt are usually quite high, I think?)