In 2007, contactless payment cards were a revolutionary concept. Initially, they were introduced with a £10 limit, to act as a spare change replacement when nipping to the corner shop or supermarket. Fast forward 14 years and the contactless limit is now being upped to 10x its original amount, as consumers will be able to spend £100 without having to enter their PIN numbers from October.
Despite being announced in the spring budget, the FCA has only recently decided to further extend the contactless limit after increasing the total to £45 during the pandemic – rising from £30. Initial responses to the change include praise of the digitisation whilst others have been concerned about the level of fraud.
Luke Maise, CEO Vibepay said, “The move from the regulator to increase the contactless limit makes complete sense as we rapidly move towards a cashless society – a trend which has been accelerated by the covid-19 pandemic.”
Andries Smit, CEO and Founder of Upside added, “I think the increased contactless limit is great news for retail. I only wish it was done earlier so that consumers and the retail industry could have benefitted from this during the lockdowns. People want contactless, frictionless payments. People don’t want cards, no bank cards, no loyalty cards. Contactless everything is the way to go and is almost certainly the future of payment.”
On the other hand, Martin Quinn, Head of Sales and Account Management at HeadlineMoney said, “Whilst the industry is patting itself on the back for raising contactless transactions to £100, the bigger issue is access to cash itself and retailers refusing to accept cash as a form of payment. Vulnerable groups such as the disabled and the elderly rely on cash and with the contactless limit now at £100 could be at risk from pick pockets and fraud.
“Criminals could easily use their cards on a £100 a time spending spree before the victim even realises they have been robed. A greater emphasis should be placed on retailers accepting cash as a form of payment rather than this unnecessary increase to the contactless limit. This would help the vulnerable and less tech savvy in society.”
Time for celebration?
One of the biggest factors for success in the payments industry is ease of access. A good paytech makes it as easy as possible for a consumer to spend money, and one way of achieving this is through flexibility. While the use of eWallets and wearable devices have increased, contactless cards are a staple payment method and following the pandemic, are likely to remain so, as they are what the vast majority of the public are comfortable with. Following a crisis like covid-19, many are unwilling to leave their comfort zone.
What has become apparent is that customers are happiest when they have choice, and by upping the limit to £100, customers are given this easy accessibility to more funds when they want to make larger purchases.
Technology isn’t perfect, but many banks rely on user prompted acknowledgements to protect from scams. Upping the limit removes this extra authentication albeit making it easier to complete a purchase. James Thorpe, VP of Communications at Mastercard builds on this idea of removing authentication by establishing the knock on effect the extension will have not just on cash (another means of payment without authentication) but chip and PIN transactions:
He said, “Contactless itself is migrating cash transactions to card, there’s no two ways about it. But cash has historically been used for lower value transactions, and card for higher ones, and therefore the contactless limit going to £100 is more likely to displace chip and PIN transactions than it is cash ones.”
Perhaps the greatest concern with the limit extension is the security concerns. But now for the first time ever, some contactless payments will have the additional protection of Section 75 of the Consumer Credit Act, which covers you for single items worth £100 to £30,000 purchased using a credit card. Additionally, SumUp, the UK based payments company, found that since the introduction of the £45 contactless limit, contactless payments went up 12% nationwide, and between April and December 2020, contactless transactions over £30 grew from 4% to 7% of all contactless transactions made – showing a growing public acceptance of the new increased limit.
Alexander Von Schirmeister, Executive Vice President For Europe at SumUp said back in spring, “This Budget announcement is likely to be most welcomed by small business owners who, at this incredibly difficult time, need as few barriers as possible that could scupper important sales.”
With less authentication, it is easier for fraudsters to abuse any stolen cards they acquire. However, Denise Purtzer, VP of Partnerships and Alliances at ClearSale found that fraud levels on contactless payments had dropped since the start of the pandemic, despite the rise in the limit.
She said “With fewer people out making purchases, there were fewer chances for fraudsters to act. As patrons and shoppers are venturing out this year, the demand for contactless payment options in order to curb the spread of the virus is growing, so it is understandable why the limit must be raised. However, this will also give more opportunities and higher-value targets for fraudsters and scammers.”
Purtzer further argued that fraud should never stand in the way of development. There have been many statistics that have come forward over the past year which have shown the extent of digital fraud in the age of the pandemic. The numbers have skyrocketed since the covid-19 breakout but technology to protect us from cybercrime has also evolved to combat this. There will never be a time where criminals simply give up and abandon trying to hack and illegally obtain information and money – therefore the concept of halting development and a certain technology’s evolution due to fear of fraud should not be one that causes us to lose sleep.
“It would be unrealistic to say contactless fraud will continue to track down following the extension, but coming from such a low base and with the security measures in place, it’s also unrealistic to suggest contactless will become a main driver of card fraud,” comments James Thorpe, VP of Communications at Mastercard.
This includes identity theft and card not present fraud. Supporting this, UK Finance found in 2020 there was a total of £574million in card fraud, of which only £16million was contactless despite there being £9.46billion of contactless spending over the same period.
This would equate to 1.8p in every £100 spent using contactless technology, a reduction in the total recorded in 2019 (2.7p). Contactless fraud on payment cards and devices represents just 2.9% of overall card fraud losses, while 55% of all card transactions were contactless last year.
While there are definitely security concerns with the £100 contactless limit extension: upping the limit is unlikely to cause a huge spike in contactless fraud, but it will make paying for larger transactions much simpler for consumers. Retailers will also benefit as a result of this – should they want to cap the transaction limit on their machines to a value lower than £100, they are able to, but by enabling the maximum limit, they are creating more payment options for their customers.
A brief history of contactless payments
- 2007: Barclaycard pioneers contactless payments in the UK with the OnePulse card, which could be used to pay at c22,000 payment terminals across the TfL network and in c6,000 retailers. The spending limit per transaction is initially set at £10.
- 2010: The Contactless payment limit increases from £10 to £15.
- 2011: The first mobile payment device enters the UK as Barclaycard and Orange join forces to launch Quick Tap, which lets users make payments by tapping their phone on a contactless payment reader.
- 2012: Barclaycard introduces PayBand, the UK’s first wearable payment device and also PayTag – a sticker less than a third the size of a credit card that sticks securely to the back of a mobile phone, turning it instantly into a contactless Barclaycard. The contactless payment limit also rises from £15 to £20 and contactless can also been used to pay for travel on London’s 8,500 buses.
- 2013: Annual contactless transactions reach £1billion for the first time.
- 2014: Barclaycard worked with TfL on the second phase of introducing contactless to London’s travel network by aiding the evolution of the yellow Oyster card readers to enable them to read contactless cards.
- 2015: Barclaycard creates the nation’s first payments fashion wearables. The spending limit per transaction rises from £20 to £30.
- 2020: Contactless limit increases from £30 to £45.
- 2021: Contactless limit increases from £45 to £100.