Could a higher contactless limit of £100 mean putting your Pin in MORE?

Contactless shoppers could potentially have to key in their Pin more often to prevent fraud when the tap and pay limit is more than doubled to £100 later in the year. 

Chancellor Rishi Sunak will announce the contactless limit for credit and debit cards will be increased from £45 in the Budget, to allow retailers to cash in on the increase in contactless payments since the start of the pandemic.

Close to two-thirds of debit card purchases were contactless in September 2020, a record high, while 687million out of 1.7billion credit and debit card payments in October were contactless, according to the latest figures from trade body UK Finance.

And the upping of the contactless limit from £30 to £45 last April saw the average amount spent per contactless transaction grew by a third to £12.38, according to Barclaycard, which accounts for nearly £1 in every £3 spent in the UK.

However experts suggested shoppers could have to enter their Pin more often in a bid to keep a lid on fraud on stolen contactless cards, which cost Britons £8.2million in the first six months of 2020.

This figure marked a 20 per cent fall on the same period in 2019, the first decline in contactless card fraud since 2013, likely due to a fall in face-to-face transactions.

‘I wondered if banks would increase the forced Pin input to maybe once every three transactions’, Andrew Hagger, the founder of personal finance site Moneycomms, said this morning.

Shoppers currently have to key in their Pin after five contactless payments under rules introduced in September 2019, or spending £130.

‘If you are more than doubling the contactless limit then surely there will be a similar increase in the level of fraudulent activity, assuming no additional security precautions are introduced’, he added.

Meanwhile the digital bank Starling previously said a few weeks ago that it would ‘strongly recommend that a system is introduced where customers have to authenticate higher payments to limit fraud exposure.’

Some of Britain’s banks are also urging the Government to stagger the upping of the limit to £100 and to reduce how many contactless payments can be made in a day to help prevent fraud, Sky News reported.

However, contactless fraud made up just 3 per cent of the £288million lost in credit and debit card fraud in the first six months of last year. Customers are entitled to their money back if they lose money this way, while most banks now allow cardholders to freeze their cards if they are lost or stolen.

The average family’s grocery bill of £56.60 a week could be paid for without entering a Pin, under the proposed changes to the contactless limit

The Financial Conduct Authority launched a consultation into the upping of the limit at the end of January, which closed last Wednesday. As well as the upping of the limit, the FCA also proposed increasing the value of transactions which could be made in a row without a Pin to £200, up from £130. 

The Treasury announced this morning the regulator had ‘recommended the change’ to the individual limit, which would enable British families to pay for their average weekly grocery bill, £56.60 in 2019, without entering their four-digit password.

However, Mr Hagger said he didn’t think the change was ‘something people have been screaming out for’, and Starling said there had not been much demand for the increase among its customers.

Pete Wickes, from the payments processor Worldpay, said in response to the announcement from the Treasury: ‘Increasing the contactless limit for the second time in a year could have a positive impact for many consumers, who can now use their preferred method of payment for larger purchases.

‘Mobile contactless payments – which have higher limits and biometric security – are the fastest growing payment method at point of sale and will account for £125bn worth of sales on the UK high street by 2024.’

Research published last week by Worldpay estimated smartphone payments were responsible for more online purchases in the UK in 2020 than debit cards were.

Starling’s chief executive, Anne Boden, added its customers were also ‘increasingly using mobile wallets as a preferred payment method over contactless payments by card.

‘In fact, they are three times more likely to use their mobile wallet than to pay by contactless, especially given the higher limits and added security this gives them.’

Mr Wickes added: ‘It is vital that shops and businesses have sufficient time to implement the changes given the current extraordinary operating conditions.

‘Some consumers will also need time to adjust. Our research reveals that around 40 per cent of UK consumers still have lingering doubts about contactless security.’ 

UK Finance said it would ‘work closely with the payments sector and retailers ahead of increasing the limit later this year.’

And although the Treasury insisted it was committed to protecting access to cash, the second rise in the contactless limit in 12 months has led to fears those unable or unwilling to use contactless payment methods could be left behind.

‘The focus cannot solely be on making things more convenient for those that can benefit from developments in payment technology’, Gareth Shaw, head of money at Which?, said when the FCA’s consultation was announced in January.

‘Millions of people still rely on cash to pay for essential products and the cash network needs to be protected for them, as the rapid pace of cash machines and bank branch closures shows no sign of slowing down.’

Some 34 per cent of people surveyed by Which? in January said they had been turned away when they tried to pay with cash.

‘Legislation needs to be introduced by the government as soon as possible to safeguard access, while the regulator must track cash acceptance, as legislation will be undermined if there is nowhere to spend it’, Mr Shaw added.