I am the primary author of INSERT ... ON CONFLICT in Postgres. I extensively studied similar features from other database systems as part of that project.
MERGE simply doesn't provide the guarantees that most users want -- not in theory and not in practice. For example, the Oracle docs introduce MERGE by saying: "This statement is a convenient way to combine multiple operations. It lets you avoid multiple INSERT, UPDATE, and DELETE DML statements."
It's likely impossible to make the concurrency guarantees work sensibly in READ COMMITTED mode while supporting MERGE's very general semantics. There are subtle but very real problems with making it behave like ON CONFLICT in one context but not in others. In my view MERGE is a perfectly reasonable feature, but it just isn't what people want when they say they want to upsert.
The SQL standard deliberately underspecifies anything related to transaction isolation or concurrency. I cannot see the standard providing any guidance on upsert for this reason.