By Jacob Passy
Walt Disney Co./Courtesy Everett Collection
A tap here and a tap there is all it takes to end up in the red.
Mobile payments encourage people spend more money, according to a recent study performed by researchers at the University of Illinois at Urbana-Champaign. The researchers examined transaction data from one of the largest banks in China and Alipay /zigman2/quotes/201948298/composite BABA -0.22% , the Chinese mobile payment platform, to understand how adoption of mobile payments affects spending habits.
Granted, mobile payments are more common in China, where the study focused its findings. Indeed, in some of the largest cities in China mobile payments are actually the preferred payment method over traditional credit cards and cash.
But the mobile wallet industry is gaining a stronger foothold in the U.S. While roughly half of American cell phone users had engaged in some form of mobile payment, that figure is expected to grow to 90% by 2020 thanks to more widespread adoption of platforms like Apple /zigman2/quotes/202934861/composite AAPL +0.25% and Android Pay /zigman2/quotes/205453964/composite GOOG +2.04% , according to a recent report from Zion Market Research .
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Here is what the researchers found:
The total amount of money consumers spent increased 2.4% after the adoption of mobile payments.
The total number of retail transactions also went up by more than 23%, largely because people were buying low-cost items more frequently.
The amount spent using physical credit cards fell by 3.9%.
People spent slightly more money online after they started using this mobile wallet.
Using a mobile wallet made people more likely to spend more on food, entertainment and travel, but didn’t affect spending on education or health care.
“Once consumers adopt mobile payment and integrate it into their daily lives, it effectively replaces the credit cards in their wallets,” said Yuqian Xu, a professor of business administration at University of Illinois and one of the study’s co-authors.
“It’s the future of how consumers will pay for small-ticket items, which means you will see fewer and fewer people carrying actual, physical credit cards in the coming years. They’ll just carry their phones, so they may not even need their wallet. It’s more convenient and it merges payment channels.”
The researchers’ findings fit into previous studies that have shown how payment methods other than cash can promote increased spending. Previous research on credit cards has shown that they similarly promote more frequent spending and costlier purchases.
Similarly, people who purchased an Amazon Echo /zigman2/quotes/210331248/composite AMZN +0.55% smart speaker were found to spend $1,700 annually on average with the online retailer, compared with $1,300 for those who were just members of the Amazon Prime program.
(This story was updated on March 26, 2019.)