The UK's fixed cap on contactless card payments is set to be abolished, marking a significant shift in how consumers pay for goods and services. The Financial Conduct Authority (FCA) has announced that from 19 March next year, the single transaction limit of £100 will be removed, granting banks and card providers the power to set their own maximums.
What the New Rules Mean for Consumers
Under the current system, contactless card payments are restricted to £100 per tap. Furthermore, a cumulative safety check triggers after £300 or five consecutive contactless transactions, requiring a PIN to be entered. The new regulations will allow providers to lift both these restrictions if they wish.
However, the FCA has emphasised that consumer choice and protection remain paramount. It stated that customers must be given the option to set their own personal contactless limit or to switch off the contactless function entirely on their cards. In the immediate future, the regulator expects most firms to maintain their existing limits while they adjust their systems and fraud controls.
Drivers for Change: Demand, Inflation, and Tech
The FCA says the overhaul is designed to let the payments industry adapt to evolving consumer habits, inflation, and new technology. Notably, payments made via mobile wallets like Apple Pay or Google Pay already have no set limit, creating an inconsistency the new rules aim to resolve.
Contactless payments have seen rapid adoption since their 2007 debut with a £10 cap. The limit has been raised incrementally, with notable jumps during the COVID-19 pandemic, reaching £45 in 2020 and the current £100 in October 2021. Barclays research indicates that 95% of eligible in-store payments are now made contactlessly.
Mixed Reactions from Industry and Experts
The hospitality sector has welcomed the flexibility. Kate Nicholls, Chair of UKHospitality, said the change would be "a positive" for businesses, enabling quicker and easier transactions for customers who prefer this payment method.
Yet, some experts urge caution. Richard Whittle, an economist at the University of Salford, warned that the increased convenience could encourage impulsive spending, particularly on credit cards, potentially leading to higher levels of consumer debt. This concern is echoed by an FCA-commissioned survey which found that 76% of consumers believed the limit should stay at £100 or lower.
The regulator has assured that robust consumer protections will stay in place. Firms implementing higher limits must have strong fraud detection systems, and victims of unauthorised fraud, such as from a lost or stolen card, must be reimbursed. David Geale, the FCA's Executive Director of Payments and Digital Finance, framed the move as one of future-proofing: "Contactless is people’s favoured way to pay. We want to make sure our rules provide flexibility for the future, and choice for both firms and consumers."
