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The Financial Conduct Authority (FCA) is exploring whether to remove or increase the UK’s £100 contactless payment limit, as part of its response to the government’s push for economic growth.
A new consultation from the regulator suggests a significant shake-up of the UK’s approach to card payment fraud protections could be imminent.
“This is the perfect opportunity to explore whether we can improve and increase trust in the UK’s payments system,” commented David Geale, executive director of payments and digital assets at the FCA.
Geale, who is also the managing director of the soon to be wound down Payment Systems Regulator (PSR), said that the regulator has “worked fast to progress this work which is one of around 50 measures we put forward at the start of the year to help support economic growth across the UK and, in turn, improve lives”.
A range of options
The FCA said it is considering options such as allowing payment service providers (PSPs) to set their own limits based on fraud controls, or removing contactless limits entirely. This would reflect the status quo in jurisdictions such as the US.
Other jurisdictions that have imposed limits have set them slightly higher than the UK — Australia’s is A$200 ($126), Canada’s C$250 ($174) and Singapore's S$200 ($150).
Another proposal the FCA is considering is a risk-based exemption that would permit firms to set their own contactless limits if they can demonstrate strong fraud controls.
This approach, already in use for online payments, could enable higher transaction limits while maintaining security.
The FCA has also floated the idea of raising the single contactless limit to £200 or beyond, adjusting cumulative limits or removing limits altogether.
Any changes would need to align with the Consumer Duty, which requires firms to act in customers’ best interests.
“Some customers might benefit from lower limits, while others might benefit from higher limits,” the paper says. “We are interested in hearing views on how this risk-based approach to contactless limits could meet a diverse range of consumer needs.”
The FCA has suggested that it could ultimately seek to rely “substantively on the Duty”, instead of setting bespoke rules for contactless limits.
The regulator believes that this would give firms greater flexibility, while still ensuring that they consider the financial objectives of their customers.
Treasury minister Emma Reynolds praised the FCA for looking into this matter.
“Every regulator has a part to play in the collective mission to drive growth through our Plan for Change, which puts more money into working people’s pockets,” she said.
Labour minister Reynolds called it “a welcome step to ensure that families can safely benefit from more flexibility when making purchases”.
Stakeholders have until May 9, 2025 to respond to the consultation.
A win for merchants?
Cash-strapped high-street retailers and hospitality players will likely be among the most enthusiastic proponents of scrapping the contactless payment limit, as it would open up more seamless payment opportunities for their customers.
Getting rid of the limit would streamline consumer transactions, reduce queues and improve customer satisfaction, especially in high-traffic sectors such as retail and hospitality.
Faster payments should result in shorter wait times too, creating a smoother shopping experience for consumers who have been reluctant to return to in-person shopping since the COVID-19 pandemic.
Eliminating the cap might also encourage higher-value or spontaneous purchases, potentially increasing overall sales, with customers no longer restricted by the £100 limit, making contactless a more convenient option for larger transactions.
Will PSPs be wary?
Removing the contactless limit inevitably raises concerns about fraud, as lost or stolen cards could be used for larger unauthorised transactions before being reported.
This increased risk could lead to higher financial losses for both consumers and PSPs.
PSPs could face greater financial liability, with higher reimbursement costs due to fraudulent activity.
If fraud levels rise significantly, it could have an impact on profit margins, something which has already been a concern, given the Faster Payments reimbursement rules in place since October 2024.
There is also the question of whether this is too little, too late from both the FCA and the government.
Mobile payments via Apple Pay, Google Pay and other digital wallets already bypass the £100 contactless cap due to biometric authentication, so some would argue that raising or removing the limit for physical card payments is long overdue.
Mobile payments are becoming the method of choice for all demographics, although engagement rates are higher among younger consumers.
The trend towards online and mobile transactions, where spending limits are often dictated by account balances rather than regulatory caps, suggests that physical card contactless limits may be losing relevance.
This would mean that abolishing the contactless limit at this point may not have the desired effect on growth, as sales are already happening via other channels such as digital wallets and e-commerce.
