But why would the merchants willing to pay the fees in providing a BNPL scheme for their customers?

One would assume that it would increase sales, which makes it worthwhile. It's not caused by increase outreach though: from what I've seen, BNPL is usually an additional payment option when you're already on the product page.

Then the question becomes: who are the extra customers that a BNPL scheme would bring, that wouldn't have made the purchase if such a scheme was not available?