Contactless Payments May Prompt Borrowers to Spend More

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Consumers who have access to contactless payment technology may be more likely to spend on the accounts associated with those programs, not only in the real world, but online as well.

Americans who adopted the MasterCard PayPass contactless credit card technology became far more likely to prefer those accounts to others within 12 months of adopting the new system, and at the same time increased spending on those accounts significantly, according to a new study from MasterCard Advisors. The researchers divided adopters into three groups – low, medium and high – based on their prior spending habits, and found that regardless of how they had used their cards before, spending on them increased by slightly less than 30 percent within the first year after they made their first contactless payment.

“In our highest spend segment, this lift translates into approximately $600 per month in incremental spend,” said Jonathan Orndorff, the principal at MasterCard Advisors who led the study. “Increases like this can have a significant impact on the issuer business case for contactless.”

But the increase in account use didn’t stop there, the report said. Consumers across all three demographics tended to use the accounts more often to set up automated payments every month – increases of between 11.8 and 28.5 percent, depending upon previous spending. In addition, consumers used these accounts to make purchases online between 8.8 and 33.3 percent more often. Further, cross-border spending – that is, the amount spent on these cards in foreign countries – rose between 53.1 and 79.1 percent.

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This change in spending habits within a year of adopting the PayPass contactless transaction system shows what MasterCard Advisors group executive for consulting services Mark Barnett calls a “halo effect,” the report said. Because it so significantly increases spending in several categories, both in the real world and online, it may prompt more credit card issuers to start giving consumers the option for adopting this type of payment option.

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