The Financial Conduct Authority (FCA) is considering a major change to contactless payment rules in the UK, which could affect millions of shoppers at Tesco, Aldi, Asda, Sainsbury’s, and Morrisons. The proposal aims to increase or even remove the current £100 contactless payment limit, allowing customers to spend larger amounts without entering their PIN.
The potential change comes as the government seeks ways to boost economic growth and modernise payment systems in response to shifting consumer habits. With more people relying on digital payments and mobile wallets, regulators argue that increasing the limit could provide greater flexibility for both businesses and consumers.
Why Is the Contactless Limit Under Review?
The last increase in the UK contactless limit occurred in October 2021, when the cap was raised from £45 to £100. This was introduced to reduce physical contact during the COVID-19 pandemic and to encourage faster, more convenient transactions.
However, with food inflation and the overall cost of living rising, a weekly supermarket shop can easily exceed £100, requiring customers to enter their PIN. The FCA believes that adjusting the limit further could make shopping easier and help stimulate retail spending.
The FCA has suggested that removing the limit altogether would “allow firms and customers greater flexibility, drawing on US experience, and levelling the playing field with digital wallets.”
How Popular Is Contactless Payment?
Contactless payment has become the preferred method for many UK consumers. Research by takepayments found that:
- 48% of UK consumers prefer contactless payments over cash or Chip & PIN.
- 88% of contactless users cited convenience as the primary reason for their preference.
John Clark, Head of Product at takepayments, explained the shift:
“Whilst contactless payments grew in popularity as a risk-aversive tactic during the pandemic, consumers may have gotten used to the convenience and speed that contactless offers – so much so that it now wears the crown as the payment method of choice over traditional Chip & PIN and particularly cash.”
As a result, many experts believe that raising the limit, or even removing it, aligns with current consumer behaviour and would further streamline transactions.
Could Removing the Contactless Limit Increase Fraud Risks?
One of the biggest concerns with increasing the contactless payment limit is the potential rise in fraud. Critics argue that removing the cap altogether could make it easier for criminals to make large unauthorised purchases using lost or stolen bank cards.
However, banks and payment providers have security measures in place to prevent fraud, including:
- Capping the number of consecutive contactless transactions before requiring a PIN.
- Monitoring spending patterns for unusual activity.
- Using biometric authentication (such as fingerprint or facial recognition) for mobile payments.
What Happens Next?
The FCA is still consulting on potential changes, and no official decision has been made. However, the proposal has been included in discussions about “tearing down barriers to economic growth”, which suggests that an increase in the contactless limit is being seriously considered.
If approved, the changes could:
- Raise the current £100 contactless limit to a higher threshold.
- Allow banks and retailers to set their own contactless limits.
- Completely remove the limit, making contactless payments similar to mobile wallet transactions.
How Will This Affect Consumers?
For most shoppers, an increase in the contactless limit would mean:
- Faster transactions for larger purchases, such as supermarket shopping and fuel.
- Less need to enter a PIN for everyday spending.
- Greater convenience, particularly for those using digital wallets.
However, some financial experts caution that higher limits could encourage overspending and increase the risk of fraud if security measures are not properly enforced.
A spokesperson from UK Finance said:
“We are continuing to speak to the FCA to understand their thinking and plans. We understand they are looking at whether industry can have greater involvement and flexibility in the limit in the future.”
