From the bank/issuer's perspective, if the customer pays for payment protection, their matrix becomes:
- they side with the merchant and penalize the customer: they risk losing the customer, their purchases and other recurring fees. The merchant does nothing more for them.
- they side with the customer and hit the merchant: the merchant has no recourse outside of providing proof of wrongdoing on the customer side.
If they have these proofs, the issuer hits the customer, who would need to get back to the merchant to further fight the charges (the bank is now out of the picture).
If the merchant doesn't have any proof, their only possible action would be to cut off the issuer, but then they're potentially cutting off a whole slice of their customer base, so it's pretty unlikely.
All in all, the bank has very little incentive to side with the merchant from the start.
