Introduction to Contactless Payments

Contactless payments have become a staple in the UK, with 85% of people using them at least once a month[1][2]. The current £100 limit on individual transactions is set to be reviewed by the Financial Conduct Authority (FCA), sparking debate about whether this cap should be increased, removed, or retained. This article explores the potential changes, their implications, and the ongoing discussion around contactless payment limits.

Background: The £100 Contactless Limit

The £100 limit was introduced to mitigate the risk of fraud associated with contactless transactions. Before 2021, this limit was even lower, at £45[1]. However, as technology and security measures have advanced, there is growing interest in revising these limits to offer consumers greater flexibility and convenience.

FCA's Review and Proposals

The FCA has initiated a review of the contactless payment limits, considering options that include raising or completely removing the £100 cap[2][3]. This move aims to provide consumers and businesses with more flexibility while ensuring that fraud risks are managed effectively. Key proposals include:

• Removing the Limit: Allowing payment service providers (PSPs) to set personalized limits based on individual risk appetites.
• Risk-Based Approach: Permitting PSPs to adopt a risk-based model, similar to the U.S., where merchants can set their own limits.
• Consumer Duty: Relying on the Consumer Duty introduced in 2023 to ensure firms prioritize customer financial objectives[2].

Economic and Consumer Implications

The potential removal of the £100 limit could have significant economic and consumer implications:

• Economic Growth: The UK government sees this as an opportunity to boost economic growth by enhancing consumer spending flexibility[4][5].
• Consumer Benefits: Families and businesses could benefit from smoother transactions and greater choice[4].
• Fraud Prevention: There is a need to balance increased flexibility with robust anti-fraud measures to protect consumers[4].

Stakeholder Feedback and Next Steps

The FCA is seeking feedback from various stakeholders, including consumer groups, banks, PSPs, and retailers, until May 9, 2025[3][5]. This engagement will help shape the future of contactless payment limits in the UK.

Regulatory Reforms and Consolidation

The review of contactless limits is part of broader regulatory reforms in the UK. The Payment Systems Regulator (PSR) is being merged with the FCA to streamline regulation and drive efficiency[4][5].

Conclusion

The decision on whether to remove the £100 contactless limit will depend on the outcome of the FCA's review and stakeholder feedback. As the UK continues to evolve its payment systems, balancing consumer convenience with fraud prevention will be crucial.