Different Google pay behavior after update to Android 12

Is anyone else having problems with Google pay in Android 12? Every time I try to use my Pixel 4 XL for contactless payments, I generally always have my phone unlocked before holding it up to the reader. In Android 11, this worked great and the payment processed immediately. Now in Android 12 when I try to do this, it asked for face ID or my pattern unlock even when the phone is unlocked already.

There is a setting under "Payments and Security" which says "Pay when unlocked: skip verifying it’s you when making purchased on your unlocked phone." This setting is enabled on my phone. I even disabled and re-enabled this setting to no avail. And basically what happens now is that the payment produces an error since it asks for verification again, the cashier has to clear the payment, and then I have to do it again (quite annoying).

Is there any resolution to this or suggestions? Thanks.

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