What is the new limit on contactless payments and how secure is it?

·5-min read
Contactless payments accounted for one in four UK transactions in 2020  (PA)
Contactless payments accounted for one in four UK transactions in 2020 (PA)

British consumers will be able to make contactless payments of up to £100 in shops, cafes and bars from Friday 15 October, a move intended to make transactions simpler but which has raised concern in some quarters.

The decision to raise the upper limit from £45 to £100, breaking away from EU-wide limitations, was made by the Treasury and the Financial Conduct Authority in the wake of a public consultation and discussions with banks and the retail sector.

The limit was last raised in April 2020 from £30 to £45.

“Contactless payment has proved very popular with consumers and an increasing number of transactions are being made using contactless technology,” said David Postings, CEO of banking industry body UK Finance.

“The increase in the limit to £100 will allow people to pay for higher value transactions like their weekly shop or filling up their car with fuel,” he said, somewhat optimistically on the latter point.

“The payments industry has worked hard to put in place the infrastructure to enable retailers to update their payments systems so they can start to offer their customers this new higher limit.”

Chancellor Rishi Sunak, hoping to encourage in-store spending as Britain continues its stuttering economic recovery from the coronavirus pandemic, has been equally enthusiastic.

“Increasing the contactless limit will make it easier than ever to pay safely and securely - whether that’s at the local shops, or your favourite pub and restaurant,” he said.

“As people get back to the high street, millions of payments will be made simpler, providing a welcome boost for retailers and shoppers.”

Shoppers are warned that, while all banks should be ready to process payments of up to £100 from Friday, not all businesses will be able to offer the service immediately as terminals need to be reprogrammed individually, a rollout that could take several weeks or even months before the new limit is recognised as standard.

Any amount can, of course, still be paid off using the extremely minor inconvenience of chip-and-PIN and via Apple Pay and Google Pay, neither of which imposes an upper threshold.

The first contactless credit and debit cards were introduced in the UK in September 2007, at which point no more than £10 payments could be made, and became an instant hit.

In 2021, an estimated 135m contactless cards are in circulation in Britain and around 9.6bn transactions are carried out on them every year, with one in four payments made in 2020 transacted via the technology, continuing the phasing out of physical currency after centuries of use.

While other countries including Canada, Australia and Singapore have all successfully raised their contactless limits above the same amount, some financial advisers fear doing so encourages thieves and risks leading people into debt by tempting them to overspend and lose track of their account balance.

Laura Suter, head of personal finance at the investment firm AJ Bell, recently outlined these objections by saying: “First, it is a thief’s dream, as they can take far more of your money in each transaction if your card is lost or stolen.

“Second, there is a risk for those who are in debt getting further into debt. The easier a card transaction is the less the consumer is actively thinking about how much they are spending, meaning it’s easier to rack up larger bills on a credit card.”

Although card fraud is a major concern for many, UK Finance figures indicate that just £7.6m was stolen from contactless cards and phones in the first six months of 2021, which means that, given £66.5bn was spent via the same technology during that time, just 1p out of every £100 can be attributed to fraud, indicating scammers are looking elsewhere for targets.

Reinforcing that idea was the same body’s data on bank transfer scams, which found that £355.3m was stolen through such schemes during the first six months of the year and again dwarfs the contactless fraud total.

A customer paying for coffee with a contactless card (PA)
A customer paying for coffee with a contactless card (PA)

It is also reassuring to bear in mind that banks require contactless users to periodically re-enter their PINs after a certain number of purchases, meaning that a thief in possession of a stolen card may only be able to use it once or twice without knowing its number before it becomes inaccessible.

Ahead of Friday’s rollout, Andrew Cregan, finance policy adviser to the British Retail Consortium, advised consumers to “take extra care when making contactless payments… as different businesses may have different limits in place, or at a different stage in their roll-out”.

He also suggested that customers who do not trust themselves not to overspend or otherwise feel uncomfortable about the new threshold “may be able to set lower contactless limits for your card, or disable contactless transactions altogether, by contacting your bank”.

Currently, Lloyds, Halifax and Bank of Scotland customers can choose their own debit card limits between £30 and £95 in increments of £5 via those banks’ mobile apps, with equivalent options for credit cards due shortly.

“We’ve listened to customer feedback to introduce this option which will allow them to make the most of the £100 limit in a way that works for them,” said Philip Robinson, personal current accounts, payments and fraud and financial crime director at Lloyds.

Nationwide and Santander are reportedly looking into providing a similar service but HSBC, Barclays and Monzo do not, at present, offer personalised limits.

Many banks also allow their customers to opt out of contactless payment technology altogether and some will supply a non-contactless card to account holders upon request.

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