If you run a rooted phone and download malware, that malware can gain root and do payments on your behalf.
Then PayPal has to deal with you revoking payments etc., they don't want to so they forbid you from using PayPal on a rooted phone.
Also I highly doubt that there is any real statistics anywhere about whether this is a real threat or not. I guarantee that nobody did such statistics properly. The only known data is from companies which sell root prevention tools, so totally unreliable. And internally I guarantee, that no banks collect such info.
So no, banks lie about this only because they can sell this to judges as safety feature, when they fuck up, which happens continuously.
They allow you to open PayPal.com on any web browser. Running Windows/macOS/Linux is basically identical to a rooted Android phone (you have local admin rights, you can modify and automate the browser, and can run unsigned code).
Apparently the world can't adult and be responsible for their actions, or people believe in that.
If you have a nominally unrooted phone on an old Android version and download malware, it can exploit a kernel bug and give itself root access and do whatever it wants.
Protecting against the first case and not the second is at best security theater.