What's Happening?
The UK is set to remove the contactless payment limit of £100, a rule first introduced in 2021, which is expected to take effect in March following a decision by the Financial Conduct Authority (FCA). This change aims to shift responsibility across the payments
ecosystem, allowing banks and card providers to manage their own risk exposure levels. Chris Jones, managing director at PSE Consulting, highlights that the real benefit for consumers lies in the ability to set personal thresholds and manage settings through an app, rather than simply increasing spending limits. However, the FCA estimates that this change could lead to an additional £31.3 million per year in contactless fraud, representing a 131% increase. Jonathan Frost, director of Global Advisory for EMEA at BioCatch, notes that some retailers are hesitant to accept contactless payments due to chargeback fraud, which could undermine the convenience intended by the policy.
Why It's Important?
The removal of the contactless payment limit is significant as it could lead to a substantial increase in fraud, impacting both consumers and financial institutions. The potential rise in fraudulent activities may necessitate enhanced fraud detection systems and could lead to increased scrutiny from regulators. For banks, this presents an opportunity to build trust with customers by implementing robust safeguards and clear communication strategies. Retailers, on the other hand, may face challenges in balancing the convenience of contactless payments with the risk of fraud, potentially affecting their willingness to adopt such payment methods. The broader financial ecosystem must adapt to these changes to maintain consumer confidence and ensure the security of transactions.
What's Next?
As the new rules come into effect, financial institutions are expected to prioritize the development and implementation of real-time fraud detection systems that focus on customer behavior. This proactive approach will be crucial in mitigating the risks associated with increased contactless payment limits. Additionally, banks and card providers will need to engage in continuous communication with customers to educate them about managing their payment settings and the importance of fraud prevention measures. Retailers may also need to reassess their payment acceptance policies to align with the new regulations while minimizing the risk of chargeback fraud.
