PURCHASE, N.Y.-Credit unions considering reissuing plastic to make the move to EMV might want to include contactless in the upgrade.

Findings from recent MasterCard Advisors research show the use of contactless payments drove up card spending by 30% in a study group.

The PayPass Adoption Study covered 15 months of MasterCard transaction data from April 2009 through June 2010. PayPass is MasterCard's contactless payments solution.

Jonathan Orndorff, principal at MasterCard Advisors, said the data "clearly shows that the convenience of contactless drove the usage of PayPass. It's adding an additional layer of value to the card, much like rewards, only this benefit is convenience. Consumers today are challenged for time, so if a card is going to save them time at checkout, they are going to use it, and move it to the top of wallet."

Moving the card up in the wallet, the study shows, also encouraged use of the swipe-and-go plastic even when the payment terminal was not contactless.

Beyond the PayPass activity, MasterCard Advisors saw lift in recurring payments, e-commerce, and cross-border spend.

From April through June, 2009, MasterCard Advisors formed its study group by looking at transaction data from 95,000 selected accounts and separated users into high-, medium-, and low-spend segments. A control group was also formed.

 

A Surprising Finding

Orndorff acknowledged that MasterCard Advisors expected the bulk of the lift percentage would come from the highest spend group. "But to our surprise, the lift was spread fairly equally across the three groups, showing a more universal value proposition."

The additional spend-about $600 per month in the highest spend group-resulted more from transactions (20% increase) than higher-dollar purchases across all segments.

Orndorff, as well as several payments experts who have talked with Credit Union Journal, expects the recent movement to speed adoption of EMV in the U.S. (Credit Union Journal, May 7) will also usher in greater acceptance of contactless.

Orndorff expects as merchants switch to EMV-capable terminals many will add contactless payment at the same time.

"By the same token, as issuers reissue cards and put in the EMV chip, the incremental cost to add contactless is minimal, pennies basically," he suggested.

Bill Hardekopf, CEO of Lowcards.com in Birmingham, Ala., was surprised by the MasterCard finding.

"I have seen studies that show how the use of credit cards increases spend over cash, because with cash consumers feel some pain when they see money leaving their wallet."

Hardekopf, conceding that convenience plays a much larger role in consumers' lifestyles today and is the only "logical" reason for the study's finding, added, "It is difficult for me to believe that not having to run a card it through a machine increases spend by 30%. I am stunned by that."

For info: www.lowcards.com, www.mastercardadvisors.com

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