After years of gradually increasing the limits on contactless card payments, the UK is now considering removing transaction caps entirely.
The current limit on contactless card payments is £100 ($136), and many transactions still require four-digit PIN authorization. If the Financial Conduct Authority (FCA) moves forward with its proposal, both the cap and the PIN requirement could be eliminated as soon as next year.
According to the BBC, the FCA is considering this change to reduce friction at checkouts and to help consumers cope with rising costs of goods and services. Additionally, the regulator noted that removing transaction limits could drive economic growth in the UK—an objective Prime Minister Keir Starmer set when he called for cuts to the country’s red tape last year.
Gauging the Impacts
It is difficult to gauge the impact that eliminating transaction limits on contactless card payments could have on the UK economy. Although contactless payments have become the predominant payment method in the UK, there has been a growing preference for phone-based payments over cards.
Payments made from digital wallets via phones don’t have a transaction limit in the UK. This is because phones have an extra authentication layer, provided the user enables a PIN or biometric authentication on their device.
Since cards lack these protections, regulators have been concerned about the potential for fraud or theft in contactless payments.
These concerns aren’t unfounded, as evidenced by the series of fraudulent purchases at New York-based convenience store chain Stewart’s Shops. After criminals made numerous sizable transactions with stolen cards, the retailer even shut down its contactless payments system across 350 stores.
Carrying the Burden
While some experts noted that a systemwide shutdown at Stewart’s may have been an overreaction, the rising frequency and sophistication of fraud attacks is well-documented. There have even been cases in which bad actors stole card data, added it to digital wallets, and made contactless payments in-store.
Although fraud is always a concern, the FCA emphasized that card issuers—not consumers—would bear the burden of fraudulent transactions. The regulator also said that many lenders allow their cardholders to set their own transaction limits, an option the FCA expects to become more widely adopted.
