I was having the exact same problem on the same MacBook Air M1.
Found this solution online and it worked for me:
Go to System Preferences>Software Update. Click on the "Advanced" button. The last choice: "Install system data files and security updates"...if it is not checked, check it and then see if you can use Apple Pay. If it is already checked, uncheck it (you may have to enter your password or use Touch ID if it's set up), then hit OK and exit that screen. Then go right back in and recheck it and hit OK again.
This simple unchecking and rechecking this box suddenly allowed me to use Apple Pay and add the credit cards to my MacBook Air.
Hope that helps...
Good Luck.