Will Contactless Card Payments Go Unlimited as £100 Cap is Eliminated?

Contactless card payments may soon become limitless under new proposals from the Financial Conduct Authority (FCA), allowing banks to set their own transaction limits. If approved, this change could significantly alter how consumers shop, making it easier to make larger purchases without the need for a PIN. The plans reflect ongoing trends in payment methods, particularly as mobile payment options lack similar restrictions.

Last updated: 05 October 2023 (BST)

Key Takeaways

• FCA proposes to remove the £100 limit on contactless payments.
• Consumers may no longer need to enter a PIN for large transactions.
• Proposals are in response to changing shopping habits and technological advancements.
• Concerns about fraud remain, but protections are in place for consumers.
• Consultation period for proposals ends on 15 October 2023.

Current Landscape of Contactless Payments

When contactless payments were introduced in the UK in 2007, the transaction limit was a modest £10. This limit has gradually increased due to the rising popularity of cashless transactions and changes in consumer behaviour. The limit rose to £15 in 2010, £20 in 2012, £30 in 2015, and was significantly boosted to £45 in 2020 during the COVID-19 pandemic. Most recently, in October 2021, it was raised to £100. These adjustments reflect not only inflation but also the growing reliance on contactless technology in everyday shopping.

The FCA's New Proposal

The FCA's latest proposal aims to give banks and other payment providers the flexibility to set higher limits or even eliminate them entirely. This could mean that large purchases, such as a supermarket shop or dining out, could potentially be paid for with a simple tap of a card, without the need for entering a four-digit PIN. The FCA believes that such changes will streamline the payment process, aligning it more closely with mobile payment options, which do not have similar transaction limits.

Reasons for the Change

This initiative comes amid a backdrop of increasing digital wallet usage, where consumers are already accustomed to making payments without stringent limits. Nearly three-quarters of young adults aged 16 to 24 are reported to regularly use mobile payments, highlighting a shift in the payment landscape. As consumers become more comfortable with cashless transactions, the FCA seeks to adapt regulations accordingly.

Consumer Concerns and Protections

While the proposal presents numerous conveniences, it also raises concerns regarding fraud and theft. Historically, each increase in the transaction limit has been met with apprehension about the potential for increased fraudulent activities. According to FCA analysis, raising the limits could lead to heightened fraud losses, but the authority asserts that fraud detection measures are improving.

In their current form, protections include requiring a PIN for consecutive contactless transactions exceeding £300 or after five consecutive payments. If the proposed changes are implemented, the FCA has stated that card providers would be responsible for ensuring these higher-value transactions are low-risk.

Consumer Protections in Place

Even with higher limits, consumers will retain protections against fraud. If a card is used fraudulently, consumers are entitled to refunds. David Geale from the FCA reassured that, "people are still protected. Even with contactless, firms will refund your money if your card is used fraudulently." This assurance may help alleviate some concerns regarding the proposed changes.

Consumer Preferences and Market Response

Interestingly, a significant portion of the public appears to favour maintaining the current limits. A recent consultation revealed that 78% of consumers preferred no change to the existing £100 limit. This suggests a potential disconnect between regulatory proposals and consumer sentiment. Many individuals, like Robert Ryan, express that entering a PIN serves as a useful budgeting tool, providing a moment of pause before making significant purchases.

Adaptation by Banks and Payment Providers

Many banks already offer customers the option to set their own contactless limits or to disable the feature altogether. The FCA anticipates that this flexibility will become more widespread as the industry adapts to changing consumer behaviours. Payment terminals themselves would also require updates, as many currently reject transactions exceeding £100.

The Impact on the Retail Sector

Retailers are cautiously optimistic about the potential for increased payment limits. Richard Staplehurst, a store owner, notes that most of his customers prefer using contactless payments, and reducing barriers to payment could be beneficial. However, he expressed concern about the implications for liability in cases of fraudulent transactions.

International Context

The UK is not alone in considering changes to contactless payment limits. Countries such as Canada, Australia, and New Zealand allow payment providers to set their own limits, highlighting a growing trend towards more flexible payment options internationally. The FCA's proposal aligns with a broader movement to modernise payment systems and reflect economic growth objectives set by the UK government.

What’s Next?

The FCA's consultation period regarding these proposals is set to conclude on 15 October 2023. Following this, the authority will review feedback from consumers and industry stakeholders before deciding whether to implement the changes. While the FCA does not anticipate immediate changes, the ongoing consultation suggests that the future of contactless payments in the UK could look very different.

FAQs

What is the current limit for contactless card payments in the UK?

The current limit for contactless card payments in the UK is £100, which was raised to this amount in October 2021.

Will consumers be protected if fraud occurs with higher contactless limits?

Yes, consumers will still be protected against fraud. If a card is used fraudulently, consumers are entitled to refunds from their banks.

What are the main reasons for the proposed changes to contactless payment limits?

The proposed changes aim to streamline the payment process, align card payments with mobile payment technologies, and reflect rising consumer preferences for contactless transactions.

When will the FCA announce the final decision on the proposed changes?

The FCA will review responses to its consultation, which ends on 15 October 2023, before announcing any final decisions regarding the proposed changes.

Are there any alternatives for consumers who prefer lower contactless limits?

Yes, many banks allow customers to set their own contactless limits or disable the feature entirely, giving consumers control over their payment settings.

As the landscape of contactless payments evolves, it is crucial to remain informed about these developments and their potential impacts on everyday shopping habits. With the FCA's proposals, the future of payments could be more convenient but also poses new challenges in terms of security. How will you adapt to these changes? #ContactlessPayments #FinancialSecurity #FCAProposals