Apple Pay on AppleWatch without iPhone

It is written everywhere that it is possible to pay with AppleWatch even if you do not have an iPhone with you.

I usually pay with my watch, but I always have my iPhone within reach. Today I first tried to leave the phone at home and pay with the watch and it didn't work. The merchant said that it was not possible to connect to the app and the transaction was cancelled.

Is there anything extra that needs to be set up so that payment works even without a phone within range? Thanks.