Why can't I use my Apple Account balance for in-app payments with Apple Pay?

In-App Purchases will always come from your Apple Account first. You can view the order of your payment methods on your Apple Account here and you will see that the Apple Account remains in the top position as seen in the screenshot. The default card for Apple Pay is for purchases made with your Wallet, such as NFC payments on retail terminals or when using Apple Pay online.

If you need to change or update your Apple Account payment method - Apple Support

To clarify, a purchase made on an app such as Amazon for products they sell is not an in-app purchase that is managed by Apple and will not come from your Apple Account balance.

What in app purchases are you trying to complete? Is it in a game or what exactly?