Instead of going through an external payment processor and losing 3% per transaction, you could offer retailers to accept Monzo payments via QR or NFC.
For example, a retailer that accepts (let’s call it) “Monzo Pay” has a QR code at the till. Monzo customer scans this QR to pay for the product. Money goes from Monzo customer to retailers Monzo account. This bypasses the external payment processor and saves on the transaction fee.
You can use this saving and keep 1% for yourself, give the retailer 1% and give 1% back to the customer (similar to Amex) as an incentive to use “Monzo Pay” in the future.
This is how it often works in Asian countries where they use LINE or WeChat to pay for products. It also allows smaller retailers or individuals to receive payments without the need of complicated payment terminals and scary contracts with payment processors.
Monzo might already have bits and pieces of the functionality, but this needs to be made as a solid product.