Almost all the merchant payments we process are done over the bitcoin lightning network so the transactions are not publicly visible as you seem to be implying.
Discussion
If you use lightning correctly, it can absolutely be private. But the vast majority of people are not going to use it correctly because it's extremely difficult to use it correctly, and there's a lot of information that goes along with that. Since Monero is private by default, the act of using it is using it correctly.
Not sure I agree with you there. I think the majority of people using lightning are using no-KYC custodial wallets like ours and Wallet of Satoshi which offer decent privacy without any difficulty. Of course you're trading convenience and privacy for trustlessness in those cases but for small spending amounts that might be ok for many people.
Installing Tor Browser or Orbot is a pretty easy additional step people can take to avoid leaking their IP to us. E-cash is another good step forward because you can use it to transact without even having a pseudonymous account that the custodian can link payments to.
Ark is coming soon too and we're hopeful that it'll be another big boost for privacy and scalability on bitcoin with a simple UX.
The problem is right there in your post. You said custodial solutions. Yes, they may be no KYC. But as long as they are custodial, they are bad, even for small amounts. You should not need to be rich in order to have non-custodial currency. That's just not okay.