This is an example of the post office using ‘cash withdrawal’ method to pay for goods and services rather than through a traditional card payment method. The reason some post offices do this is because it is more profitable for them to do cash withdrawals (the banks who participate pay a fee to the post office for providing the service) whereas as normal card transaction costs the post office money to process the card payment.
The reason it will fail at the post office is because Monzo don’t offer cash withdrawals via the post office (though they do offer cash deposits at the post office). Most traditional banks allow both withdrawals and deposits.
It’s naughty behaviour by the post office, being greedy and insisting of processing as withdrawals rather than card payments so they receive fees. I’m not surprised Monzo opted not to allow withdrawals at the post office, the offending post office branches are fleecing participants of the scheme by processing all card payments as cash withdrawals.