Should the Limit on Contactless Payments Be Scrapped?

Across the world, contactless payments are revolutionizing daily transactions. Through the tap of your card or the wave of your smartphone, contactless payments have allowed consumers to pay for goods and services in a convenient, quick, and secure way.

In 2021, Rishi Sunak (prior to his 2022–2024 premiership) announced that the limit for contactless payments would rise from £45 to £100. The Financial Conduct Authority (FCA) suggested that scrapping the contactless cap altogether could give businesses greater flexibility and boost the economy as a whole.

A record 93.4% of all in-store card transactions up to £100 were made with “touch and pay” in 2023. And it certainly isn’t just young people that are enjoying the convenience of contactless payments. According to Barclays, the percentage of active users between the ages of 85 and 95 crossed 80% for the first time in 2023, and for the third year in a row, over-65s were the fastest growing group for contactless usage.

That being said, the arbitrary limit on contactless payments set by the government remains a frustrating obstacle, and certainly should be scrapped altogether.

The most common argument for maintaining a limit on contactless payments has been security. Concerns about theft and fraud drove the decision to cap contactless transactions, with the idea being that stolen cards could only be used for small purchases.

Whilst these were valid concerns, as is usually the case, technology has caught up. Advanced algorithms, real-time alerts, and biometric verification on mobile devices all work to detect fraudulent purchases much more quickly than in the past. Apple Pay is increasingly popular amongst iPhone users, requires face-ID verification or a password, and has no payment limit whatsoever.

Moreover, many card issuers now offer zero-liability for transactions that are flagged as fraudulent, ensuring that consumers aren’t on the hook for stolen payments.

There are also already other regulations in place (mostly derived from the EU) that are intended to help prevent fraud, making the £100 cap unnecessary. Currently, you are already required to put your card into the machine and enter your PIN from time to time before you can use contactless again. Consumers and banks alike should be afforded the choice to opt in or opt out of such fraud prevention initiatives, but it is almost certainly the case that the current regulations are too stringent. We should be allowed to assess our own risks of fraud and exercise our own judgements freely.

With new and updated security infrastructure in place, the cap has become more of an inconvenience and unnecessary limitation.

Scrapping the cap doesn’t just benefit consumers either. Longer transaction times are costly to businesses, especially when dealing with higher volumes. Removing the cap on contactless payments would ensure a seamless transaction process for consumers and businesses alike, especially benefiting the retail and hospitality sector.

From settling a restaurant bill to paying for your weekly shop, consumers and businesses alike would benefit from the option of quicker transactions. Ultimately, the decision about a payment limit should be in the hands of consumers, retailers, and banks themselves, rather than the government.

This piece originally was published by the Foundation for Economic Education.