PayPass Pushes Cardholder Spending Up 30%, MC Says

Are contactless payments really all that much easier than a swipe? It may surprise you, but new research from MasterCard Advisors actually suggests that the answer is yes. Once a cardholder tries PayPass, MC says, spending with that card goes up 30%.

We’ve asked Jonathan Orndorff, a Principal with MasterCard Advisors, for more information on the study, as well as a better explanation of the role Advisors plays in the payments industry.

Introduce us to MasterCard Advisors. What does the group do?

MasterCard Advisors is the professional services arm of MasterCard Worldwide and is believed to be the largest payments consultancy in the world. Advisors provides a wide range of data-driven solutions to the payments, retail, media and marketing industries, leveraging an unrivaled data warehouse, cutting-edge analytic and modeling capabilities.

You’re preparing to publish a new study this week. Can you give us an overview of the study’s larger findings?

The big finding is that PayPass really does drive value – that PayPass adoption is linked to a stronger preference for a credit card. Relative to control populations of non-adopters, we saw an approximately 30% increase in cardholder spend in the 12 months following adopter’s first PayPass enabled transaction. In addition, we also observed higher recurring payments, higher cross-border payments, and greater e-commerce spending as well – all suggesting that PayPass drives top-of-wallet behavior.

And when you consider that PayPass integration into Google Wallet and ISIS will likely have a tremendous positive impact on PayPass acceptance, the business case for PayPass is even stronger.

What’s one specific area of research where you think the results will surprise industry experts?

One of the more surprising insights is that the ~30% lift in spend relative to control in the 12 months after PayPass adoption was consistent across all three of our spend segments (Low, Medium and High Spenders). While we saw a more rapid initial growth in the Low Spend Segment, and a steadier increase in the High Spend Segment, all spend segments settled at approximately 30% lift in spend after 12 months.

Apparently, preparations on the data side were extensive. Tell us about the scale of this study.

Although the study sounds extensive, the underlying MasterCard transaction data leveraged in the study is readily accessible by MasterCard Advisors consultants. The study required approximately 120 hours of work, with a lot of effort going into ensuring that we established proper control populations. These control populations ensured that our findings would be normalized for any general market increases or decreases in spend due economic conditions.

MasterCard understands that its transaction data and the unique and powerful insights derived from it represent a key competitive advantage. Recognizing this, MasterCard has invested heavily in cleansing the data, anonymizing it and storing it for the past several years so that it may be easily leveraged by MasterCard Advisors in consulting, information products and on-behalf-of marketing services.

Is there a set date and time for when the study will be made public?

We expect to release the study at some point early this week.

Jonathan Orndorff

Principal, MasterCard Advisers 

Jonathan Orndorff is a Principal with MasterCard Advisors where he is Advisors’ acknowledged expert in the development of unique, powerful insights leveraging MasterCard’s data assets and the translation of those insights into actionable recommendations for clients. Jonathan also plays a key role in the development of new, innovative offerings for Advisors and the business development and delivery oversight of large, complex and data-driven Advisors’ engagements across North America and Latin America.

Prior to assuming this position, Jonathan was the North American Lead across seven Advisors consulting practices. In addition, Jonathan had day-to-day responsibilities leading business development and delivery for solutions in analytics, consumer research, customer experience, interactive channels and product strategy & innovation.

Prior to joining MasterCard, Jonathan was a strategist with Modem Media (now Digitas) leading the development of interactive, mobile and integrated marketing strategies for Fortune 100 clients in the airline, auto manufacturing, retail banking, professional services and consumer goods industries. Previously, Jonathan was with Price Waterhouse where he led strategy projects with the firm’s Chairman’s office during its merger with Coopers & Lybrand, and led consulting engagements in financial BPR (business process redesign) and BPO (business process outsourcing).

Jonathan has an M.B.A. in both Finance and Accounting from NYU Stern School of Business and a B.A. in Economics from the St. Lawrence University.

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