By Charlotte Fisher

Copyright manchestereveningnews

A major change could be coming to contactless payments as proposals to lift the £100 limit have been set out by the City regulator. Under the changes, card providers would be able to set their own contactless limit. The Financial Conduct Authority (FCA) said it wants to give firms the flexibility to decide the right limit for them and their customers. This could mean people having more convenience to “tap and go” when making bigger payments. But feedback to the regulator indicated limited demand from some consumers and firms to see limits increased, with fraud concerns also raised. Banking and finance industry body UK Finance said that it does not expect to see immediate changes to the £100 limits for consumers, although it said firms may consider changes to “background limits” such as how often someone needs to enter their Pin. The regulator’s proposals are out for consultation until October 15, 2025. Never miss a story with the MEN’s daily Catch Up newsletter – get it in your inbox by signing up here The proposals come after the contactless card limit has been raised in steps over the years, starting at £10 in 2007 and currently standing at £100. The consultation document said: “We propose replacing the current regulatory limits with a new exemption, which would allow (payment services providers) to process contactless payments where they identify the risk of a payment transaction to be low. “(Payment services providers) can still set or maintain contactless payment limits as they see fit in line with their business and customer needs and in compliance with regulation.” It continued: “Our approach is designed to allow (payment services providers) to take a risk-based approach to contactless payments, while also giving them greater flexibility to manage that risk, including though the ability to set their own contactless limits.” The regulator previously launched a contactless payments engagement paper, which received nearly 1,300 responses. It said, based on industry feedback, it anticipates that most firms would continue to implement the £100 limit for the time being. The regulator said that while it anticipates firms are unlikely to make significant changes to their contactless limits in the short term, and that they will only do so if there is a low risk of increased fraud, some firms could potentially increase or remove their limits, which could heighten the risk to consumers. Existing rules stipulate a £100 limit for any single contactless card transaction, and a cumulative total of £300 in contactless transactions or no more than five consecutive contactless transactions since the last application of “strong customer authentication” to verify a payment was made. Modelling in the document estimates that if payment services providers raised both their single and cumulative limits to £150 and £450 respectively, fraud could increase up to a maximum of £31.3 million per year over three years, which would be a 131% increase on the current contactless fraud rate. The consultation document said: “However, we consider it highly unlikely that this fraud scenario would be realised,” adding that this was “presented as a worst-case scenario”. The regulator emphasised that while firms could increase or remove contactless limits “they would only be permitted to allow contactless payments where they have identified a transaction to be low risk and they would still be liable for reimbursement”. The consultation document said: “As (payment services providers) are liable for any reimbursement for unauthorised contactless payments, if (payment services providers) increased the limits and their fraud rate increased, their reimbursement costs would also rise. “They are therefore incentivised to maintain low levels of contactless payments fraud.” Join the Manchester Evening News WhatsApp group HERE Another issue is that many point of sale terminals in the UK are programmed to decline contactless payments at £100. The consultation document added: “Respondents have expressed limited appetite to bear implementation costs at the present time.” Many card providers already offer customers the ability to adjust their personal contactless limits or turn off contactless functionality on their card altogether. The FCA said it is encouraging firms to continue to offer their customers this choice. David Geale, executive director of payments and digital finance at the FCA, said: “We’re seeing smarter payment technology and more well-established fraud controls, so it’s the right time to let firms tailor contactless payments to fit their customers’ needs and drive innovation. “While we wouldn’t expect to see immediate changes to limits by firms, they would have the flexibility to make payments more convenient for customers. “People are still protected. Even with contactless, firms will refund your money if your card is used fraudulently.” Data from UK Finance found that 82% of contactless transactions are below £25 and more than 90% of contactless transactions are below £50. The spread of these transactions may be considered by firms in deciding whether to change their limits, the regulator said. The consultation document said: “In the medium to longer term, (payment services providers) may decide to make changes to their contactless limits, due to improvements in fraud detection technology or changes in market conditions (eg increase in prices). “If (payment services providers) do make changes, we expect there could be benefits to merchants and consumers if there was a reduction in the number of step-ups (ie Pin entries) without corresponding increases in fraud, leading to lower payment friction and greater time savings. This could be delivered through innovative improvements in fraud detection systems.” The review of the contactless card limit is one of around 50 measures that the regulator outlined in a letter to Prime Minster Sir Keir Starmer in January to help support economic growth. A spokesperson for UK Finance said: “We welcome the FCA’s proposal to allow firms greater flexibility in how they manage contactless payments. “For customers, we don’t expect to see any immediate changes to the £100 contactless limit. “Firms may consider changes to background limits, such as how often a Pin is required, but any changes will be made thoughtfully with security at the core. “Unauthorised fraud losses are protected against and our data shows that customers are fully refunded in more than 98% of cases. The industry will work with the FCA to take this new proposal forward in a way that delivers the best customer experience when making payments.”