3. Funds are settled as L-BTC in the merchant's wallet.
What services are you using in the background to convert Lightning to Liquid L-BTC?
There is already something similar with Aqua wallet and I think they are using atomic swaps via Boltz Exchange.
We can also us Boltz Exchange website directly for the same thing, and I think fees are lower that way.
EDIT:
I just saw you are also using Boltz Exchange, so you can just clarify if you are adding additional fees?