Why is Apple Pay asking for SSN to verify identity after setup?

You have reached an aggregate amount of transactions that require this verification.

https://www.cnet.com/tech/services-and-software/apple-cash-users-will-soon-need-to-verify-their-identity-to-send-over-500/

Also note in the Support Article that explains the verification Process.

• When you use Apple Cash, you might be prompted to verify your identity again, even if you have previously done so.

Verify your identity for Apple Card or Apple Cash - Apple Support

If it's asking for verification on a child's account double check that the apple account is not set up as an adult, the verification process should only trigger on accounts for users aged 18 or older and it's required by law Green Dot Bank has to have some form of verification process

Why is positive ID required?

The Patriot Act requires that lenders, banks etc. obtain a confirmed ID.

“To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.”

Social Security Cards allow Green Dot Bank to confirm age. Green Dot requires positive identification when the aggregate total of all transfers exceeds $500. There are other milestones that might trigger a reverification of identity.

https://applecash.greendot.com/termsconditions/