Shoppers are increasingly paying in ways that don't involve touching cash, or handing over a credit card, because of fears of the coronavirus, according to Mastercard.
The credit-card giant reported a 40% jump in contactless payments — including tap-to-pay and mobile pay — during the first quarter as the global pandemic worsened.
Mastercard CEO Ajay Banga said the trend was being driven by consumers "looking for a quick way to get in and out of stores without exchanging cash, touching terminals, or anything else."
"We are seeing an increase in the use of contactless transactions, and we think this trend will continue after the pandemic," Banga said Wednesday on Mastercard's first-quarter earnings call with analysts.
The World Health Organization has denied reports that the agency warned against using cash amid the outbreak. But regardless of whether there's a proven risk, the psychological factor of people thinking of cash as "unclean" appears to be changing how people choose to pay.
Before the virus outbreak, mobile payments in the U.S. were consistently below global adoption rates at roughly 10%, according to according to management consultancy Bain. Experts cite a deeply embedded legacy system and rewards cards as reasons Americans historically don't tap their phones to pay. In China, by contrast, more than 80% of consumers used mobile payments last year.
Mastercard also reported a "dramatic" increase in online payments thanks to shutdowns of major cities caused by the outbreak. So-called "card not present" transactions jumped 40% year over year in the first quarter. Banga, who announced he would step down at the start of next year, said he expects the shift to digital to persist after the pandemic.
Meanwhile, in-person, or "card present" transactions saw a sharp decline. Banga said the slowdown in consumer spending "was currently in the stabilization phase in most markets" giving Wall Street hope that the slowdown was starting to reach a bottom. Shares of Mastercard jumped 7% after the earnings call.
The payment companys profit fell in the first quarter, but its $4.01 billion in revenue and $1.68 earnings per share were better than Wall Street's projections.
"While it is not possible to dismiss the risk that the virus will resurface and lead spending declines to reaccelerate, the weekly spending data in MA's slide deck suggests the spending decreases may have bottomed in mid-April," Bill Carcache, analyst at Nomura Instinet, said in a note to clients Wednesday.