The UK financial regulator, the Financial Conduct Authority (FCA), has announced significant changes to contactless card payments, set to take effect from March 19, 2026. Under the new rules, the current £100 limit on single contactless card transactions will be scrapped, allowing banks and card providers to set their own maximums. Additionally, the cumulative limit of £300 or five 'taps' before a PIN is required will also become flexible, with providers able to lift this restriction if they choose.

This move aims to provide flexibility, allowing banks to respond more effectively to evolving consumer demands, inflationary pressures, and advancements in technology. While mobile payment options like Apple Pay currently have no spending limits, card-based contactless payments have historically seen gradual increases since their introduction in 2007 with a £10 limit. This limit rose to £15 in 2010, £20 in 2012, £30 in 2015, £45 during the Covid pandemic in 2020, and finally £100 in October 2021.

Despite the push for increased flexibility, the FCA acknowledges consumer sentiment, with a survey revealing that 76% of consumers prefer the limit to remain at £100 or lower, even as rising shop prices make bumping up against the current limit more likely. However, research by Barclays Bank indicates that 95% of eligible in-shop payments are now contactless, highlighting its widespread adoption.

Concerns have been raised regarding potential impacts on fraud and consumer spending habits. While current contactless fraud rates are low (1.2p for every £100 of transactions), there is a possibility of increased losses if criminals obtain stolen cards and banks raise limits significantly without robust controls. The FCA, however, states that the rule change applies only to providers with strong fraud controls in place and expects banks to implement checks, such as text alerts for large payments or card stoppages for unusual activity. Existing consumer protections will remain, ensuring victims are reimbursed in cases of unauthorised fraud, provided they report lost or stolen cards promptly.

Another concern is the potential for increased impulse spending due to the 'lack of friction' associated with contactless payments. An economist from the University of Salford cautioned that this ease could lead consumers to buy items they don't truly need, potentially contributing to debt accumulation, particularly with credit cards. However, the FCA has mandated that banks must allow customers to set their own contactless limits or even disable the facility entirely, offering consumers control over their spending and security preferences. Despite the average contactless payment in 2024 being £16.10, the option to customize limits provides an important safeguard.

David Geale, executive director of payments and digital finance at the FCA, emphasised the goal to ensure rules provide flexibility for both firms and consumers. Kate Nicholls, chair of UKHospitality, welcomed the change as a positive development for high street businesses, citing quicker and easier transactions. While many providers are expected to maintain existing restrictions in the short term, the long-term changes aim to balance convenience with robust consumer protection measures.