An update has been given to plans which could see major changes for anyone who uses their bank card for contactless payments in shops. Anyone buying their shopping with their bank card could be in for a major change under plans unveiled by the government.
If you're doing your weekly shop and it totals more than £100 in places like Tesco, Sainsbury's and Asda, you have to put their card into the chIp and pin machine and enter the number on the keypad.
With the rate of food inflation soaring, £100 doesn't go as far as it used to in supermarkets. However the Financial Conduct Authority (FCA) has said that it is looking at raising the contactless limit.
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One expert said he thought the plan, which the Financial Conduct Authority hopes will support economic growth, would be of benefit to shoppers, who overwhelmingly prefer to pay this way.
John Clark, Head of Product at takepayments said: "Our previous research revealed that contactless is by far the most popular payment method in the UK - we surveyed over 1,000 UK consumers to understand how they prefer to make payments and nearly half of the respondents (48%) chose contactless card payments ahead of cash and Chip and PIN.
"Almost 9 in 10 (88%) of those who preferred contactless said convenience was the key reason why. Whilst contactless payments grew in popularity as a risk-aversive tactic during the pandemic, consumers may have gotten used to the convenience and speed that contactless offers – so much so that it now wears the crown as the payment method of choice over traditional Chip and PIN card payments and particularly cash."
The most recent contactless limit change - from £45 to £100 - took place back in October 2021 in an effort to encourage no touch point payments during the pandemic . The government also hoped that by upping the limit and allowing consumers to spend more using their preferred payment method, this would help to boost retail and economic growth post-COVID, reports Lancs Live.
Following a decline in retail sales during December 2024, the Financial Conduct Authority has reportedly pitched potential methods to "tear down barriers to economic growth" to the Prime Minister - which includes changes to contactless payments.
The UK's economy grew slightly in November 2024 (+ 0.1%) - after it shrunk in the previous 2 months - but the growth still fell short of expectations, and Chancellor Rachel Reeves is coming under increasing pressure to rebuild consumer confidence. The FCA also added that raising the limit would allow firms and customers greater flexibility and help to level the playing field with digital wallets.
Businesses won't need to manually update their payment systems as the change will occur automatically in line with any changes to the limit. The FCA last month issued a letter in response to the Government on the steps it is taking, and those it could take, to support economic growth.
The regulator said it "could also remove the £100 contactless limit, allowing firms and customers greater flexibility, drawing on US experience, and levelling the playing field with digital wallets".
FCA is also looking into simplifying mortgage rules, which could help homebuyers to secure a property. In the letter, FCA chief executive Nikhil Rathi said the regulator would: "Begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults."
A spokesperson from UK Finance said: "We are continuing to speak to the FCA to understand their thinking and plans. We understand they are looking at whether industry can have greater involvement and flexibility in the limit in the future."
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