Mobile Payments and Consumer Spending in the Post-Pandemic U.S.

From physical cards to mobile payments

For centuries, consumers relied primarily on physical currency for in-person transactions. Cash created obvious practical challenges, including loss, theft, security concerns, and the need to physically carry money. The expansion of payment cards during the twentieth century represented a major change in how consumers could access and use their finances.

By the 1950s and 1960s, more than 100 banks were issuing credit cards through networks that would become Visa and Mastercard. Over subsequent decades, cards became a central part of consumer transactions globally.

Technology continued to change the card experience. Debit cards allowed consumers to spend directly from bank accounts, while credit cards allowed them to borrow at the point of transaction. Cards subsequently incorporated magnetic stripes, EMV chips, online card credentials, and eventually NFC technology for contactless payments.

Mobile payments extend this evolution by moving the payment interface from the physical card to the smartphone.

Near-field communication, or NFC, allows compatible phones and payment terminals to exchange information at very short distances. Other mobile-payment technologies include QR-code payments and app-based systems that allow consumers to make purchases directly through applications such as Starbucks, McDonald’s, or digital-wallet interfaces.

Visa reported in its 2024 fiscal-year report that tap to pay had become the default way its cardholders paid in nearly 60 countries and territories. At the time, the U.S. had approximately 535 million cards enabled for NFC-based tap-to-pay transactions and contactless penetration of roughly 50%.

For this analysis, mobile payments are defined as in-person transactions completed through a mobile phone using a contactless or app-based payment interface.

The U.S. payments market is still evolving

The U.S. is an important market for mobile payments because of the size of its consumer economy, even though adoption has historically lagged some other developed and emerging markets.

According to the Federal Reserve Bank of Atlanta’s 2023 Survey and Diary of Consumer Payment Choice, U.S. consumers made an average of 45.6 payments per month. Credit cards accounted for 32% of total payments and debit cards for another 30%.

At the same time, mobile-payment adoption was increasing. The Atlanta Fed reported that 72% of consumers had adopted digital payments, including person-to-person services such as Zelle and Venmo. Adoption was particularly high among younger, higher-income consumers: 80% of consumers aged 18–34 with household income of at least $125,000 made at least one payment through a phone in 2023.

McKinsey’s 2024 consumer-payments research similarly found that 92% of surveyed U.S. adults reported making some type of digital payment, including browser, app, and in-person mobile-wallet payments. In-store digital-wallet payments increased from 19% in 2019 to 28% in 2024.

This increasing penetration exposes payment providers to a very large commercial market. McKinsey estimated approximately $10 trillion of annual consumer-to-business spending across the United States and Europe, making the continued shift toward digital interfaces strategically important for banks, networks, wallets, merchants, and payments infrastructure providers.

COVID-19 accelerated an existing shift

The pandemic appears to have accelerated mobile-payment adoption rather than creating the underlying technology shift itself.

Health concerns, social-distancing policies, and restrictions on some forms of in-person commerce encouraged consumers to experiment with contactless and remote payment methods. Research from the Bank for International Settlements found that mobile payments’ share of total card transactions increased sharply during 2020, while Federal Reserve research documented a decline in cash use and greater exposure to digital payments.

Greene, Merry, and Stavins found that purchases made in cash declined by roughly five percentage points during 2020 and that consumers shifted more than three percentage points of their monthly purchases online. Their results suggest that COVID-19 may have had a longer-lasting habit-building effect on consumer payment behavior.

Physical commerce nevertheless remained resilient as economic activity normalized. Research on post-pandemic shopping behavior found that more than three-quarters of surveyed consumers were expected to return to pre-pandemic shopping habits, suggesting that online and in-store commerce would increasingly coexist rather than one replacing the other.

This makes the in-store payment interface particularly important: consumers returned to physical locations, but many returned with greater familiarity with digital payments.

Why payment interfaces may matter for spending behavior

One possible mechanism connecting mobile payments and consumer spending is the concept of payment salience, sometimes described in the behavioral-economics literature as the “pain of paying.”

Paying requires consumers to register that money is leaving their account. Different payment methods can make that transaction more or less visible or psychologically salient.

Broekhoff and van der Cruijsen found that contactless mobile payments were associated with lower pain of paying than physical payment instruments such as cash and cards. Their findings suggest that convenience and lower payment friction can affect how consumers perceive the act of making a purchase.

The effect could be particularly relevant in discretionary categories such as restaurants, entertainment, travel, and leisure, where consumers may already experience less pain of paying because the purchase is associated with enjoyment rather than necessity.

This provides a plausible mechanism for the observed relationship. It does not establish that mobile payments cause consumers to spend more.

Measuring U.S. consumer behavior

The analysis uses public data from the Federal Reserve Bank of Atlanta’s Survey of Consumer Payment Choice (SCPC) and Diary of Consumer Payment Choice (DCPC) for 2021 through 2023.

The SCPC contains respondent-level demographic information, payment-method adoption, and perceptions of different payment instruments. The DCPC captures transaction-level information over a three-day diary period, including payment method, merchant type, transaction amount, and other transaction characteristics.

Common respondent identifiers allow demographic information from the SCPC to be connected to transaction records in the DCPC.

The primary explanatory variable identifies whether a respondent was observed using a mobile-payment method at least once for an in-person discretionary purchase during the diary period. Mobile-payment methods include tap to pay, QR-code transactions, and in-app payments.

Importantly, this measures observed use, not whether the consumer owns or has adopted a mobile wallet.

That distinction matters. Someone who makes more discretionary purchases automatically has more opportunities to be observed using mobile payments. The resulting coefficients therefore need to be interpreted as associations rather than causal effects.

What counts as discretionary spending?

The main outcome is total discretionary expenditure during the diary period.

It includes qualifying purchases at restaurants and bars; fast-food restaurants; coffee shops and cafés; entertainment and recreation businesses; travel-related merchants including taxis, airfare, hotels, motels and campsites; and department stores and other retailers.

Food spending is also examined separately from other discretionary spending such as travel, entertainment, and merchandise.

The results

The estimates are consistent across progressively stricter specifications. Each result should be read as an association, not a causal effect.

1Mobile-payment users spend more in the baseline comparison

The first model compares mobile-payment users and non-users without additional controls. Mobile-payment use is positively and statistically significantly associated with all three spending categories.

The estimates imply that mobile-payment users recorded 45.5% higher total discretionary spending, 25.0% higher food spending, and 28.3% higher other discretionary spending.

The results provide an initial indication that mobile-payment use and discretionary expenditure move together. They do not account for the fact that mobile-payment users may differ from non-users in income, age, demographics, or other characteristics.

2The relationship remains after controls

The second specification adds demographic and macroeconomic controls, including age, gender, race, household income, the S&P 500, and a discretionary-expenditure price index. The mobile-payment coefficient remains positive and statistically significant.

After the controls, mobile-payment users show approximately 40.7% higher total discretionary spending, 24.7% higher food spending, and 71.9% higher other discretionary spending.

Household income is also positively and significantly associated with discretionary spending, which is consistent with higher-income consumers having greater disposable income and potentially greater access to and use of financial technology.

The persistence of the mobile-payment coefficient is consistent with the underlying hypothesis that mobile-payment use and discretionary spending are positively related. Lower payment friction or reduced payment salience provides one possible explanation. The analysis itself, however, does not directly identify that mechanism.

3The relationship also appears within the same consumers over time

A portion of the dataset follows the same respondents across multiple years. This makes it possible to estimate a fixed-effects model that controls for characteristics of an individual that do not change over time.

Rather than simply comparing one mobile-payment user with another non-user, the model asks a more useful question: How does spending differ for the same person between periods in which mobile-payment use is observed and periods in which it is not?

The results again show a positive and statistically significant relationship.

For the same respondents, spending was approximately 49.3% higher for total discretionary purchases, 35.8% higher for food purchases, and 68% higher for other discretionary purchases during periods in which mobile-payment use was observed.

The within-person result strengthens the evidence that the relationship is not explained entirely by permanent differences between mobile-payment users and non-users.

It still does not establish causality. Other factors that change over time could influence both mobile-payment use and spending, while higher spending itself increases the number of opportunities for a consumer to be observed paying by mobile phone.

What the findings mean for the payments industry

The central finding is straightforward: mobile-payment use is consistently associated with higher discretionary spending in the post-pandemic U.S.

For payments companies, banks, wallets, card networks, and merchants, the significance extends beyond the simple migration of transactions from plastic cards to phones.

Payment interfaces can affect the transaction experience itself.

A physical card requires consumers to present a card and, depending on the transaction, insert it, swipe it, enter a PIN, or otherwise actively authorize the payment. Mobile interfaces can reduce these steps and make the transaction faster and less physically salient.

The results are therefore consistent with the possibility that lower transaction friction and lower payment salience are associated with different consumer spending behavior. They do not prove that reducing friction causes consumers to spend more.

That distinction matters for the industry.

The strategic value of mobile payments may not be limited to replacing the physical form factor of cards. Mobile payments increasingly sit at the intersection of the consumer, merchant, bank, card network, loyalty program, and digital platform. As the payment interface becomes embedded into phones, merchant apps, wallets, and other digital environments, providers have more opportunities to integrate payments with rewards, identity, offers, financial services, and the broader commerce experience.

The broader market direction

International markets show how far this development can go.

Mobile payments have been associated with financial inclusion and lower transaction costs in developing economies, including through systems such as M-Pesa in Kenya and QR-based platforms in Kazakhstan. In more developed markets, they increasingly compete on convenience, speed, integration, and user experience rather than simply access to financial services.

The U.S. is therefore moving toward mobile payments from a different starting point.

It already has a highly developed card infrastructure, widespread bank-account access, and deeply entrenched payment networks. Mobile payments do not necessarily replace that underlying infrastructure; in many cases they provide a new interface on top of it.

This makes the U.S. transition less about replacing cards overnight and more about gradually shifting how consumers initiate and experience a payment.

The continued rise of contactless acceptance, digital wallets, mobile applications, and faster payment infrastructure suggests that the distinction between “card payments” and “mobile payments” may itself become less meaningful over time. The underlying funding instrument can remain a card or bank account even as the consumer increasingly interacts with the transaction through a phone.

Outlook

Mobile payments are becoming a larger part of U.S. consumer commerce, and the post-pandemic period provides evidence that their use is meaningfully associated with spending behavior.

Across pooled and within-person specifications, observed mobile-payment use is positively associated with discretionary spending. The relationship persists after accounting for several demographic and economic characteristics.

The next step is determining causality.

Richer longitudinal datasets, natural experiments, or randomized experiments could help establish whether the payment interface itself changes expenditure or whether consumers who are already more likely to spend are simply more likely to use mobile payments.

More recent data will also be important. Payment technology is changing quickly, and adoption patterns observed between 2021 and 2023 may evolve as contactless acceptance expands, wallets become more integrated into commerce, and new payment rails reach consumers and merchants.

For payments companies, the broader implication is that payment technology should be analyzed not only as infrastructure, but as part of consumer behavior. The industry is increasingly competing over the interface through which consumers experience commerce—and the design of that interface may matter for how people transact.