The new limit is more than double the current £45 that was only raised less than a year ago.
Image source: Rishi Sunak/HM Treasury
Chancellor of the Exchequer Rishi Sunak announced this morning ahead of his budget that he would be more than doubling the current contactless spending limit.
As it stands, customers can spend up to £45 in one transaction using contactless, but under the new regulations, consumers will be able to spend up to £100.
The move was first mulled over by the FCA back in January 2021 after it launched the consultation on the proposed increase.
Following the outbreak of Covid-19, the FCA increased the contactless limit from £30 up to £45 from 1 April 2020 after the World Health Organisation suggested that banknotes could harbour the Covid-19 virus for several days and urged consumers to use contactless to slow its transmission.
However, the move to more than double the current limit has left some scratching their heads.
“The contactless limit increasing to £100 per transaction will be a useful tool for many people as it is more convenient, speeds up queues, and limits touchpoints to help stop the spread of Covid-19. But few people have considered the full impact this could have on fraud,” said Ricky Lee, founder and CEO of sync.
“I expect that fraud will go up as a result of the higher contactless limit and there will be a knock-on impact for consumers at some point in the near future.”
“Ultimately, a new, more secure payment method will soon come in to take the place of contactless. For now, I think that contactless is a good thing, but it is vulnerable to fraud. That’s why sync. is building new, safer technologies to take the convenience of contactless to the next level,” he added.
Other fintechs have taken a more cautious approach to the new limit, with the thought of higher fraud cases at the forefront.
CEO and founder of Starling Bank, Anne Boden said: “With a £100 limit, we would like to give Starling customers the chance to opt-out and use a lower limit if they want. We would build this capability into the app.”
“Our customers are increasingly using mobile wallets as a preferred payment method over contactless payments by card. In fact, they are three times more likely to use their mobile wallet than to pay by contactless, especially given the higher limits and added security this gives them.”
According to new figures from Barclaycard, contactless has surged in popularity over the past year, highlighting the need for a higher limit.
Now, nearly 90 per cent of all transactions are made using the touch-free payment method and, following the limit increase, the average value of contactless payments jumped by nearly a third, from £9.60 in 2019 to £12.38 in 2020.
Despite the wary response, other fintechs have welcomed the higher limit.
Vincent Choi, CEO of payments provider Pomelo Pay, said: “We are delighted that the Chancellor Rishi Sunak has decided to increase contactless payment limits to £100.”
“This should be seen as a win-win since this decisive move supports businesses which have quickly embraced technological solutions to survive and thrive during the pandemic while helping consumers stay safe by limiting the number of transactions they have to manually enter their pin for.”
Unsurprisingly payments processing giant Visa welcomed the move to increase the limit, pointing to the low level of contactless fraud in the UK.
Jeni Mundy, managing director UK and Ireland, Visa said: “The decision to raise the contactless limit to £100 is a good move for British shoppers and for our high streets alike. Contactless payments offer a fast, secure and seamless payment experience.”
“We stand ready to work with our clients and partners to support the Government and the FCA to make this happen as soon as possible, so both consumers and retailers can benefit as the economy opens up.”
In the UK, contactless is one of the safest ways to pay, with there only being a 0.1 per cent fraud rate for the touch-free payment method in 2020.