Default path for wallpapers in pantheon is /usr/share/backgrounds/pantheon but when it is installed as a desktop in linux i.e arch linux its wallpapers are installed at /usr/share/backgrounds/elementary instead.
Desktop settings >background / wallpaper will try to find /usr/share/backgrounds/pantheon but may not be able to find.
The workaround is to create a symlink
$ sudo ln -s /usr/share/backgrounds/elementary /usr/share/backgrounds/pantheon
Close settings and reopen, it will start showing wallpapers in background selector.