FCA Abolishes Contactless Spending Limits, Grants Banks Flexibility
The Financial Conduct Authority (FCA) has officially scrapped the £100 limit on contactless card transactions, empowering banks and card providers to establish their own restrictions. This regulatory shift is designed to enable financial institutions to better respond to evolving consumer demands, inflationary pressures, and advancements in payment technology.
Understanding the Previous Regulations
Under the old FCA rules, each in-person contactless payment with a credit or debit card was capped at £100 per single transaction. Additionally, cumulative spending limits were in place: consumers could spend up to £300 or make five contactless taps before being required to verify their identity, typically by entering a four-digit PIN. Importantly, these cumulative totals reset to zero whenever a PIN was used or an online payment was made. It is worth noting that digital wallets, such as Apple Pay, have always operated without any spending limits.
What Has Changed and Why
The FCA has now removed both the single transaction and cumulative spending limits, allowing banks to set their own parameters. This decision comes as rising shop prices have made consumers more likely to encounter the £100 barrier, which was initially introduced in October 2021. However, the watchdog has indicated that it does not anticipate widespread adoption of higher limits in the near future, as most consumers are satisfied with the current arrangements. Major high street banks, including Nationwide, NatWest, HSBC, Barclays, Lloyds, and Santander, have confirmed they will not be making any immediate changes. Similarly, challenger banks like Starling, Monzo, and Revolut are maintaining the £100 limit for the time being.
Addressing Fraud Concerns
A key concern surrounding the removal of limits is the potential for increased fraud, as criminals with stolen cards could accumulate higher spending before being detected. The previous single transaction limit helped prevent purchases of very expensive items, while cumulative limits capped overall losses. According to the latest data from UK Finance, the trade body for banks, contactless fraud rates remain low at 1.2p for every £100 spent. The FCA has projected that if card providers raise limits to £150 for single transactions and £450 for cumulative spending, fraud could increase by up to 131% over the next three years in a worst-case scenario. To mitigate this risk, the FCA expects banks to implement robust fraud checks before adjusting limits, which may include sending alerts for large payments or blocking cards after unusual activity. Furthermore, the FCA has recommended that banks allow customers to set their own spending limits, providing an additional layer of protection for those worried about fraud or overspending.
Protections in Case of Lost or Stolen Cards
In theory, fraudsters may be able to spend more before being stopped if limits are raised. However, existing reimbursement rules still apply. Consumers should cancel their card and report it stolen immediately via phone or app to avoid liability for up to £35 of losses. All unauthorised transactions can be claimed back from the bank within 13 months, provided the cardholder was not complicit in the fraud or negligent in protecting their card details.
Managing Personal Spending Habits
Another issue raised by contactless payments is the reduced friction in spending, which can make it harder to track expenses. Even with the £100 limit, the average contactless payment was just under £18, according to UK Finance, suggesting that consumers may not rush to spend up to new limits. For those concerned about overspending, options include setting personal limits or disabling contactless payments entirely through their bank.
