Buyer Beware: Paying by Phone Could Be Costing You Extra

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Smiling man paying restaurant bill at checkout with smartphone payment
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It feels like magic: You just wave your phone at checkout or tap it on the payment processor, and you’re done.

But the fact it’s so easy might be a problem, research suggests. This technology, part of what’s called “frictionless payments,” could be changing consumer behavior.

“Frictionless payments are financial transactions where the payment process is designed to be as easy and quick as possible for the customer,” says Stripe, a mobile payment company. “This type of payment system requires minimal action from the customer (e.g., choosing previously saved payment information or using technology that enables payments with just a touch or a glance).”

This technology makes things quick, but not painless. Researchers analyzed the adoption of mobile payments at a popular Chinese bank and found customers who used the technology spent 9.4% more on transactions and made 10.7% more credit card purchases.

“We would expect that the effect would be similar in the U.S. mobile payment market,” lead researcher Yuqian Xu told NPR. Xu is an assistant professor at the business school at the University of North Carolina at Chapel Hill.

The unsurprising reason behind the increases is the convenience factor, Xu says. Not needing to remember to bring a physical card and making payments much faster are both ways that lead to bigger and more frequent spending.

This also likely extends to saving your credit card information in your web browser, a habit many people became comfortable with during the pandemic, notes Time.

Xu says this behavior isn’t necessarily a reason to avoid paying for things with your phone, although it’s something to be mindful of. Improved technology offers both convenience and better security, after all.

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