The Financial Conduct Authority said the plans would impact anyone who uses bank cards in shops and supermarkets
Shoppers using supermarkets could witness a significant transformation at the checkout within months if proposals to overhaul till operations are implemented.
Customers visiting Tesco, Aldi, Sainsbury’s, Morrisons and Asda might discover they can settle their weekly shopping bills with greater ease as a consequence.
At present, if a bill exceeds £100, shoppers must take additional steps such as utilising chip and pin technology.
The Financial Conduct Authority (FCA) revealed it wishes to provide card companies with the flexibility to determine appropriate limits for themselves and their clientele.
This development could enable consumers to enjoy enhanced convenience when making “tap and go” transactions for larger purchases – and experts believe it might trigger economic improvements.
Under these proposals, Tesco, Aldi, Sainsbury’s, Morrisons and Asda would gain the authority to establish their own payment thresholds – with the consultation period concluding on October 15.
The consultation document stated: “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 stated that whilst it expects 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.
Current 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 stressed that whilst firms could raise or scrap 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”.
“They are therefore incentivised to maintain low levels of contactless payments fraud.”
Another hurdle is that numerous point of sale terminals across the UK are set up to reject contactless payments at £100.
The consultation document stated: “Respondents have expressed limited appetite to bear implementation costs at the present time.”
Numerous card providers already give customers the option to modify their personal contactless limits or disable contactless functionality on their card completely.
The FCA said it is urging firms to continue offering 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.”
The FCA has acknowledged that certain consumers could be more affected by changes to contactless payments than others.
Under the Consumer Duty, it stated that firms are expected to identify and take appropriate action if specific groups of customers, such as those with characteristics of vulnerability or those protected under the Equality Act 2010, consistently receive poorer outcomes.
UK Finance data revealed that 82% of contactless transactions are below £25 and over 90% are under £50. This distribution may influence firms’ decisions on whether to alter their limits, according to the regulator.
A spokesperson for UK Finance commented: “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.”
Graham Mott, director of strategy at cash access and ATM network Link said: “Our research shows that for most adults, paying by digital is now the default with adoption of digital wallets alongside contactless cards, the preference for most UK banking customers.
“More than half of people no longer carry a physical wallet with them when they leave home. While the proposed changes may provide greater convenience and complement contactless limits for digital wallets, our data does show that two-thirds of people have experienced issues when making payments.
“It is therefore important that people are prepared and aware of what they can do to avoid disruption in the event of payments systems being interrupted.”
Consumer spending figures from Barclays reveal that a record 94.6% of eligible in-store card transactions were contactless in 2024.
The previous year saw 10 times as many contactless transactions per month compared to 2015, Barclays noted.
Gabby Collins, payments director at Lloyds Banking Group, said: “Lloyds, Halifax and Bank of Scotland customers can already set their own contactless payment limits in our apps – in £5 steps, up to £100 – and we’re absolutely committed to keeping that flexibility.”
Riccardo Tordera Ricchi, head of policy and government relations at The Payments Association, stated: “Card payment limits shouldn’t be dictated by legislation but instead set by card providers and consumers based on their individual risk appetite and payment preferences.”