Enthusiasm for contactless payments continues to surge, with new research showing almost three in five Australians now have a contactless card, and 40 per cent of this cohort use them regularly. According to the latest edition of the HP-RFi Australian Payments Research report, which was released yesterday, while "consumers are highly conservative about changing payments behaviours", they have embraced contactless payments to the extent that they are starting to replace cash in some situations. While cash remains the most popular payment mechanism for small value transactions - it remains king for 75 per cent of survey respondents compared with 80 per cent a year ago - contactless is increasingly picking up the slack.The report credits Coles and Woolworths for much of contactless payments' progress, following the retailers' roll out of contactless terminals across their networks. As a result, supermarkets are the most popular venue for contactless payments, with 80 per cent of contactless users saying they had paid for groceries using the system.However, the report notes that the lack of contactless payment terminals in smaller retailers remains a limiting factor.Mobile payments haven't fared as well though, with the report suggesting demand for smartphone-based payments has plateaued, with less than a quarter of respondents adopting such applications. Only 23 per cent of respondents expect their phone to become their preferred payments platform in the next five years.Apple's continued failure to integrate near-field communications technology into the iPhone has stymied contactless mobile payments. Although cases and stickers featuring NFC chips are available, they remain a somewhat clunky solution.However, mobile payments could receive a fillip through the introduction of digital wallets such as Visa's V.me, which can be used to store multiple payment cards, and, in the future, reward cards. These are expected to be even more attractive to consumers if they are integrated into tap-and-go ticketing systems such as Melbourne's Myki and the Sydney Opal system, says the report.Meanwhile, PayPal remains a popular payments alternative, with two in five Australians using the service. It's even more popular with the under-34s, who boast a 50 per cent adoption rate. The report notes that "traditional payment methods could be threatened by alternate payment methods as young consumers begin to develop more complex payment needs and PayPal expands its reach."Another emerging threat to incumbents is the virtual currency - with two per cent of survey respondents saying they had used Bitcoin to make payments in the last 12 months. However, these users largely fit the stereotype of the younger white professional male.