PCI-DSS (enforced by banks/payment processors) means the EMV token store on your Android phone must be in an isolated uncompromised location (usually the TEE).

If your phone is rooted or has an unlocked bootloader then it's possible that trusted store is no longer secure or can be snooped on by a third party. Given Google Wallet/Pay handles EMV tokens and stores them on the phone, it has to pass PCI-DSS before banks will allow it.

This is the biggest reason why Google tries as much as possible to block Google Pay on rooted/unlocked devices. If a device fails compliance (a rooted phone certainly does), as far as banks are concerned it's not safe.

But people just find it easier to say "Google is Evil".

You also have the EUs Payment Services Directive (so a law) which require strong customer authentication, rooted devices can also fail up here. If anyone else than the user is able to unlock the screen (and thus authenticate a payment), you've failed the Payment Services Directive.