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Mobile Payments Will Be the Big Contactless Winner

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Our survey of 500+ consumers indicates a faster push toward contactless payment solutions, which we believe are at a tipping point with COVID-19 as the catalyst. Mobile payments will be the biggest winner of changing consumer behavior, in our view.

COVID-19 Is The Catalyst To Change Consumer Payment Behavior

The Cowen Payments and Technology Hardware teams recently surveyed over 500 consumers to glean insight into how consumers’ in-store payment behavior is evolving in the face of the COVID-19 pandemic. The survey reaffirms the acceleration of several well-advertised mega-trends, namely a faster push toward electronic payments vs. cash and heightened consumer appetite for contactless payment solutions. It also illuminated several other behaviors that we believe will shape the payments landscape over the next 10 years.

Our key takeaways include:

  • Mobile payment platforms and digital wallets are likely to be the biggest winners from the contactless payment evolution, potentially accelerating the demise of physical plastic. 
  • Consumers are looking for omni-channel payment solutions that can frictionlessly accommodate both online and offline transactions. Surveyed consumers show a clear willingness to transact entirely across a single application.
  • Contactless payments appear to be at a tipping point in the US. ~50% of consumers surveyed indicated they are content with the number of merchants offering in-store contactless payment technology. ~50% also indicated that access to contactless payments is a factor influencing where they shop. Consumers across all age groups and income levels are embracing contactless payment technology.

Mobile Payments Is The Big Contactless Winner

Contactless transactions in the US – both mobile and “tap to pay” plastic cards – are proliferating in the post-COVID-19 world. Our proprietary consumer survey reaffirms strong momentum for in-store contactless payment adoption. Over 50% of respondents indicate increased use of contactless technology since the onset of COVID-19. A whopping 70% of respondents indicate they plan to increase use of contactless solutions going forward.

The survey indicates a preference for mobile payment solutions over physical plastic “tap and go” cards at the point of sale. Only 28% of respondents indicated that the proliferation of contactless physical cards would diminish their use of in-store mobile payment technologies. ~48% of respondents that have access to both contactless (tap and go) physical cards and mobile payment solutions prefer mobile over plastic.

In short, we believe the leading consumer facing mobile payment applications are poised to benefit disproportionately from the shift to contactless, potentially accelerating the disintermediation of plastic.

Lastly, the barriers to entry in the digital wallet war only seem to be rising. Few providers have the wherewithal to create the needed two-sided payment ecosystem, with heft across both users and accepting merchants. We note that 95% of respondents exclusively use just one mobile payment service, suggesting the stickiness of digital wallets. That said, 79% of respondents indicated that they are at least open to using another digital wallet provider in the future.

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