This article has been updated from its original version.

What would make a consumer using a contactless payment card spend more during the first year of owning such a card? The technology? Or perhaps the improving economy?

A new MasterCard Worldwide contactless-payments study involving U.S. credit cardholders suggests consumers’ spending rises 30% during the first 12 months of owning a MasterCard PayPass card.

But there appears to be no clear-cut reason why consumers feel compelled to spend more, study leader Jonathan Orndorff, a principal at MasterCard Advisors, tells PaymentsSource about the soon-to-be-released report.

All of the data compiled in the first PayPass Adoption Study relates to 95,000 U.S. accounts in which cardholders used PayPass for transactions, though most were conducted outside of the U.S.–in Canada, the United Kingdom or Mexico–because of more contactless terminals in use, Orndorff explains. The study’s findings did not differentiate behavior between domestic or international transactions.

MasterCard researchers are not certain what psychology was at work with the consumer behavior because MasterCard Advisors did not question any of the cardholders as part of the study. MasterCard plans to conduct follow-up research to delve into consumers' reasons for using PayPass.

“Was it just considered something cool, or something important about owning the latest trend or technology that would increase spending? We’re not sure,” Orndorff says.

Consumers possibly may have bought into the MasterCard marketing pitch that using PayPass saves time in the transaction process, Orndorff notes.

Whatever the reason, PayPass users spent more overall, regardless of how many times they used their card, and the study’s findings suggest cardholders perceive a value in having a contactless card, he adds.

As such, the first PayPass Adoption Study likely will serve as a vehicle for MasterCard sales staff to approach issuers about the value of contactless cards.

Using MasterCard’s transaction data, MasterCard Advisors compared account behavior between two segments of U.S. accounts over 12 months, starting in July 2009. One segment included PayPass cardholders who either never used the card or used it only one time, while the other segment began steady PayPass use in 2009, a MasterCard press release noted.

Neither segment was provided an incentive from MasterCard to use PayPass more often than the other. Those who did not use a PayPass card at all were not figured into the spending study results, Orndorff says.

With a fixed start date, researchers were able to track the lifecycle of PayPass use and compare pre-contactless adoption behavior, MasterCard stated.

Researchers combined the two cardholder study groups into low-, medium- and high-spending segments. Over the 15-month study period, MasterCard Advisors reported a noticeable increase in preference for a particular card, though not necessarily PayPass, as “top-of-wallet” and a “sustained 30% lift in spending” across all three segments.

In addition, the researchers noted that a consumer using a contactless card only once somehow experienced a “halo effect” of spending more anyway with other MasterCard products, the report found.

The spending increases for all card types varied by segment but generally were between 11.8% and 28.5% for recurring payments, 8.8% to 33% for e-commerce transactions, and 53% to 79% in cross-border spending, the report notes. The study did not specify spending increases with PayPass only, though it cited cross-border spending as a key asset for possessing contactless technology.

As such, the report points to the cross-border spending increases as a key reason for issuers to consider the PayPass card when converting U.S. customers to EMV smart cards in the coming years.

“An EMV card doesn’t necessarily have a contactless feature,” Orndorff notes. “Most EMV cards slip into a reader, but with PayPass as a contactless EMV card the consumer waves it near the terminal to pay.”

Ultimately, the report suggests to issuers that a PayPass card has an effect on a consumer’s spending behavior, Orndorff insists.

“It appears to have a value for the consumer well beyond the contactless behavior,” he says. “We know, because we observed it for several months.”

But if one is on the outside looking in at MasterCard, the study doesn’t come off as quite a resounding endorsement of PayPass cards.

Ron Shevlin, senior analyst with Boston-based Aite Group, tells PaymentsSource he isn’t sure the study reveals anything other than the improved economy has spiked card transactions.

“Did the rising tide float all boats, and did everyone just spend more?" Shevlin asks.

Orndorff counters that because researchers studied the pre- and post-PayPass spending behavior of the consumer segments, they were able to more easily make adjustments to reflect any spending changes that correlated with changes in the economy.

However, Shevlin admits there is another side to the argument, one that says a cardholder obtaining a PayPass is making a decision that he wants that card to be top-of-wallet.

“Consumers are driven by convenience, and they are loath to change what they do until they try out something new and discover it really is more convenient,” Shevlin contends.

An increase in spending with a contactless card also may reflect that the places where contactless cards are accepted, such as gas stations, carry products that became more expensive during the course of the research, he suggests.

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