Watchdog says banks will be able to respond to changing consumer demands, inflation and new technology
The limit on contactless card payments has been scrapped, allowing banks to set their own restrictions.
The City watchdog, the Financial Conduct Authority (FCA), stated that this change will enable banks to adapt to evolving consumer needs, inflationary pressures, and advancements in technology.
Below we examine the changes to the rules and the potential impacts.
What were the rules?
Previously, when paying in person with a credit or debit card, there was a £100 limit on each single contactless transaction, as mandated by the FCA.
Additionally, there were cumulative spending limits. Consumers could spend up to £300 or make five contactless taps before being prompted for verification, typically by entering a four-digit PIN. Whenever a PIN was used or a payment was made online, the cumulative total would reset to zero.
There has never been a limit on payments made using digital wallets such as Apple Pay.
What has changed?
The FCA now permits banks and card providers to remove both the single transaction and cumulative spending limits. Rising retail prices have increased the likelihood of consumers reaching the £100 limit compared to when it was first introduced.
However, the FCA has indicated it does not expect providers to immediately adopt this option, as most consumers are satisfied with the existing limits. Major high street banks including Nationwide, NatWest, HSBC, Barclays, Lloyds, and Santander have confirmed they will maintain the current limits. Similarly, challenger banks such as Starling, Monzo, and Revolut are also retaining the £100 limit for the time being.
Isn’t this making life easier for fraudsters?
Concerns have been raised that criminals who obtain contactless cards could spend more before being detected. The single transaction limit restricts the purchase of high-value items, and the cumulative limits cap total spending.
According to the latest figures from UK Finance, the banks’ trade body, contactless fraud rates remain low at 1.2 pence per £100 of transactions. The FCA has estimated that if card providers increase single and cumulative limits to £150 and £450 respectively, fraud could rise by 131% over the next three years in a worst-case scenario.
Nonetheless, the FCA expects banks to have fraud detection measures in place before raising or removing limits. This may include sending a text or call when a large contactless payment is made or blocking a card if a pattern of unusual contactless transactions is detected.
Furthermore, the FCA has stated that banks should allow customers to set their own limits, enabling individuals concerned about fraud or spending habits to implement protective measures.
What if I lose my card or have it stolen?
In theory, fraudsters could spend more before being stopped. However, reimbursement rules apply.
You should cancel your card and report it stolen as soon as possible by contacting your bank or using its app. Failure to do so may affect your liability.
Otherwise, you can claim back all unauthorized payments made with your card by informing your bank of any fraudulent transactions within 13 months.
The bank must reimburse you unless it can prove you were complicit in the fraud or failed to protect your card details.
Will I end up spending more?
Another concern about contactless spending is the reduced friction in transactions. Paying with plastic has already made it harder to track spending, and contactless payments further reduce the pause for consideration.
Even when the limit was £100, the average contactless payment was just under £18, according to UK Finance, suggesting there is no widespread rush to spend up to the limit.
If you are worried about overspending, you can set your own limits or disable contactless payments entirely.
