This is a very interesting one. The payment specifications say that an auth code can contain letters or numbers, however basically every bank have just used numbers until Monzo came along to shake up the industry per se.
Because some merchants did not comply with the rules of accepting these new types of authorisation codes the transactions would decline. I believe Monzo has a whitelist of places now where the processor will only generate numbered transactions to prevent any problems but of course can only do so when enough people complain about it and they cotton on that this is the reason its declining.
I was unable to get a SIM only contract from 3 because of this a long time ago as they had an instore verification system that couldn’t accept letter authorisation codes.
tl;dr: Monzo uses letters in auth codes except in places they’re aware it will cause problems.