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MasterCard: 'Contactless' Consumers Spend More Cash

Tickers in this article: V AXP MA

NEW YORK (MainStreet ) -- Does the simple act of handing your credit card over to a cashier, or at least swiping the card in a scanning device at the register save you money?

In a strange way, yes it does - at least in a relative sense.

A new study from MasterCard Advisors says that credit card consumers who use "contactless" card transactions (where the consumer waves the card, or more recently, even a smartphone, over a payment terminal) tend to spend more money using their credit card than do card "swipers."

From a technology sense, contactless cards save consumers time by avoiding the task of running the card through a magnetic stripe reader.

Swipe-free cards are embedded with a special microchip and radio signal that links the card and the payment terminal to quickly and accurately record the purchase. The payment device, in turn, contacts the bank that issued the credit card to okay the transaction. A receipt is generated and the consumer walks off with his or her purchase -- all within a matter of seconds.

Contactless cards are becoming more ubiquitous, with Mastercard's(MA) PayPass; Visa's(V) PayWave and American Express's (AXP) Express Pay all hitting the market recently. Consumers are apparently getting the hang of using swipe-free credit cards.

Expect those companies to ramp up their contactless card campaigns if MasterCard has its data correct.

According to MasterCard, consumer spending rises 30% among contactless card users when compared to consumers who swipe their cards at the register. The data doesn't tie any obvious differences between the cards to the disparity. After all, waving a card only saves a few seconds compared to swiping.

But the novelty alone may account for the spending increase, as MasterCard says that 30% figure comes in the first 12 months of owning a contactless card.

Another possible reason: MasterCard indicates contactless credit cards are the "top of the wallet choice" among consumers, presumably for their ease of use and faster payment completion capabilities.

"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 MasterCard study finds.

The study also notes use of a contactless card means more spending among "low, medium, and high spend segments." So it's not just the affluent that are spending significantly more money using swipe-free cards. Growth among all three categories was "consistent", the study reports, although high earners may use their cards slightly more.

"In our highest spend segment, this lift translates into approximately $600 per month in incremental spending," says Jonathan Orndorff, the chief researcher on the study. "Increases like this can have a significant impact on the issuer business case for contactless."