“Tap-to-Pay” Not a Portal To Overspending

Simon Zhen

By  Posted on Thu May 3, 2012

Simon Zhen is an analyst, staff writer and columnist for MyBankTracker.com. His columns draw focus to all aspects of personal finance and to bank rates, products, and services. More Columns »

“Tap to Pay” Not a Portal To Overspending

Beau Giles / Flickr source

From location-based deals to merchant-funded rewards, there are plenty of ways that financial technology can lead to more spending. In fact, recent data suggests that just owning a contactless payment cards might prompt consumers to spend more. But I don’t buy it.

MasterCard PayPass — like Visa PayWave, American Express ExpressPay and Discover Zip — is a feature that allows a consumer to wave a card or mobile device in front of a payment terminal to make a purchase instead of having to swipe a card. And a new MasterCard Worldwide study shows that consumers’ spending rises 30 percent during the first 12 months of owning a MasterCard PayPass card.

Why consumers tend to spend more with a contactless payment card is a mystery to MasterCard, but based on personal experiences, the increase in spending is probably not due to the convenience of contactless payments.

Having used my contactless-ready Chase debit card at McDonald’s, Rite Aid, 7-Eleven and other locations, I’ve found that it didn’t contribute to an increase in my spending — no matter how cool I felt when other shoppers became amazed at my no-cash, no-swipe payment.

For me, the novelty of the feature wore off after a couple of purchases.

It certainly feels more convenient, but in reality, the “wave-to-pay” capability saved no more than half a second compared to the traditional card swipe. (Fine. I could leave the card in my wallet and just “wave” my wallet. That’s maybe, what, another second saved?) The excitement does not match the teenager who finally gains access to a debit or credit card, which expands shopping horizons to the web.

I’m paying for the same things with the same card. It’s just the little motion that I’m making with my hand. To credit that motion for a 30 percent rise in spending seems implausible.

And, despite the hype revolved around near-field communications (NFC) technology, another method of contactless payments, the new technology itself will not spur consumer spending neither. I may not have to pull out my card, but I still have unlock my smartphone, activate the NFC-hardware and enter a PIN. Again, its just another means to an end — making a purchase.

If merchants decide to entice me with a bombardment of targeted deals on my phone, I might buy more stuff. Unless a certain offer is exclusively tied to an NFC-based purchase, that has nothing to do with NFC as a payment method.

So what could have contributed to MasterCard’s findings? A plethora of factors.

The rise of contactless payments acceptance in that time period, the overall improvement in consumer spending and the availability of a new or upgraded card account are all possible explanations.

MasterCard plans to dig deeper into the study results to see if contactless-payments adoption actually boosted a cardholder’s tendency to shop.

What was your experience with contactless payments? Did you find that it led to more spending?

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  • Marcosbrandino

    Hi Simon,
    I have experience of years working with payments middle, and specifically speaking about my country I can tell you that the some fractions of seconds in buying makes big difference mainly by the owner of the store that can sells more.

    • http://www.mybanktracker.com Simon Zhen

      For high-traffic merchants, the convenience of tap-to-pay is undoubtedly more apparent. But, I still don’t think MasterCard can attribute a rise in spending — to the tune of 30% — to simply having a tap-to-pay card.

  • Ajoshi43

    Hi Simon:
    During past 2 years I have done some unscientific observations at a Philadelphia region’s well known convenience store. It  is near a commuter rail station in the suburban area. Knowing the local clerks a… I asked the questions (1) About what percent of rush hour riders use the Tap method and how many use Swipe of Mag Strip. (2) Is the faster Tap method better for you? My local shift manager said, ” Why don’t you sit here and do your own research.” So I spent some time there over 4 days — during peak periods between 7:30 to 8 AM each day.Unscientific observations over 4 weekdays:(1) CONVENIENCE STORE —  I saw about 30% Cash, 65 % Swipers and rest … at most 5% Tapers. ..were Tappers. The young manager noted — ” I don’t see much advantage with a tap. You saw how people meet their “regulars’, have a little chit-chat and the check-out lane the clerk can motivate them to BUY just one other item by saying, “Will there be anything else? “. This is the temptation lane — said my source. ” We usually land that fast temptation purchase.  On average we make 3-5 % of total sell  – right there in the checkout lane. ” I do not want them to move too fast — 2-4 minutes wait is enough to get them to smell a “Hot Sausage/Egg on Bagel”  as they wait for others in front. So I am fine with the Swipe.” Another set of Observations at a Supermarket: (2) A LOCAL SUPERMARKET  – At a check-out lane (this was a bit trickier) and saw only 4 Tappers. In the Swiper group — about 60 % used Debit (to get cash back) and 20% Credit — maybe 15 -20 % at most cash and pay-check.  “Getting Cash back is liked by our customers — they do not like to pay ATM fees.”  I asked about that last minute pick up such as “Gossip Magazines, Hershey Candy Bar, little bag of peanuts, etc.” The supermarket information — received after a long letter writing and interrogation process (the Manager thought I was a Spy from local Acme Brand) .. said, “Yes, the pick up there is about 3-5 % of the total bottom line.” WARNING – THIS IS AN UNSCIENTIFIC OBSERVATION — NOT a STUDY Just is one person’s curiosity to get a “Sanity Check” during past 12 months. But talking to the daily user and daily checkers, and their security people — it re-affirms my belief (I am a transit consultant on fare system) that “You gotta ride the bus and see who rides, how people pay fares, how they try to dodge payment with excuses,  get to get to know the realities out there.” Ashok Joshi Philadelphia suburban Regional user of transit.