Apple Pay Disabled ("Because the security settings of this Mac were modified") when MacBook lid is closed

This thread was closed a while ago but explains the symptoms:

https://discussions.apple.com/thread/250017065?answerId=250164549022#250164549022

Basically, Apple Pay works great until the lid of the laptop is closed - then it goes into a panic with the following error:

As others noted, this is easily reproducible and the state of the clamshell lid is the root cause. If I have my MacBook Pro (13" 2019 Touch Bar/4TB Ports) attached to my docking station/monitor/etc but with the lid open on my desk, I can open and use the Wallet prefpane no problem. But as soon as I close the lid and put the laptop in its stand, the Wallet pane freaks out with the above and Apple Pay is disabled.

This didn't used to be the case and doesn't make much sense. I get that the fingerprint sensor is probably desired for functionality here, but the Apple Watch used to fill in for it (mine is paired to the laptop and working properly)

macOS is Mojave 10.14.5