MasterCardAdvisors released the results of their first PayPass Adoption Study, a quantitative analysis of the changes in U.S. account transaction behavior after adopting a contactless payments solution. This examination of 15 months of payments behaviors offers a set of data points and a number of insights into the adoption and use of new payment solutions such as MasterCard PayPass.
In one of the study’s key findings, the research showed that within the first 12 months of their first contactless transaction, PayPass-enabled accounts spent almost 30% more on average, using their PayPass-enabled card. The research also found a clear correlation between contactless adoption and preference for a particular card, illustrating that a contactless payments solution may help drive top-of-wallet behavior.
The study divided accounts into low, medium and high spend segments based on their monthly spend prior to adoption, and the 30% lift was consistent across the three segments, regardless of their spend levels prior to adoption. “In our highest spend segment, this lift translates into approximately $600 per month in incremental spend,” says Jonathan Orndorff, Principal at MasterCard Advisors and study lead.
The PayPass Adoption Study also noted significant lifts in top-of-wallet behaviors such as Recurring Payments, e-Commerce and Cross Border spend. Adds Orndorff, “Lifts in not just overall spend but the quality of spend also help the business case for contactless.” Most significant of these is the lift in Cross-Border spend, which exceeded 50% in all three spend segments in the 12 months after PayPass adoption. “Given the lift in Cross-Border spend associated with PayPass adoption, U.S. issuers might want to consider the role of PayPass in their EMV and EMV travel card strategies. U.S. issuers can look to Canada, where we saw ‘EMV+Contactless’ strategies successfully deployed by many Canadian issuers during their EMV migration,” says Orndorff.
Notes Mark Barnett, Group Executive, Consulting Services for MasterCard Advisors, “The research shows that even after cardholders use contactless only once, there is a clear halo effect.”
One segment had no PayPass activity, while the other initiated PayPass use in July 2009. The fixed “start date” meant that the researchers could track the lifecycle of PayPass use and its impact on overall behavior as accounts became familiar with its use. The methodology also allowed the research team to control for differences between the two segments by comparing pre-adoption behavior. The researchers divided the combined sample into three spend segments $0 – $400, $500-$1499 and $ 1500 or more per month based upon monthly spend in the three months prior to July 2009 to determine if account behavior differed by spending segment.