I suspect that when using Garmin Pay, the watch needs to verify that it is being worn on the wrist. This is done for security reasons so that the watch is not lost or stolen and used by someone else for fraud purposes. And this was done with the heart rate sensor on the wrist. Since the sensor does not monitor the blood flow to calculate the heart rate, a single diode is sufficient.
"The passcode is required once a day while wearing the watch and each time when the watch is detected off of the wrist. ..."
I have not tested this, but it seems to be a plausible explanation. You can test this yourself by turning off Garmin Pay and seeing if the diode goes out.
