FCA suggests relaxing contactless payment limits

The FCA is exploring a more “outcomes-based” approach to regulating retail payments. It is reconsidering current limits on contactless transactions. The FCA requests feedback on three options by 9 May 2025.

Market context

In an Engagement Paper, the FCA explains that it wants to give payment service providers (PSPs), consumers and businesses more flexibility in determining contactless limits, while also limiting fraud risks. The aim is to keep in step with the inflationary environment, the Government’s National Payments Vision and promote international competitiveness.

That flexibility is warranted by the comparative security afforded by contactless card payments. According to the latest data from UK Finance, the fraud to turnover ratio for contactless fraud is notably lower than that for unauthorised card fraud overall.

Current UK regulation

Strong Customer Authentication (SCA) 

Regulation 100 of the Payment Services Regulations requires PSPs to apply SCA in scenarios which give rise to risks of fraud (e.g. where payers make electronic payments or access payment accounts online). The Government has already committed to revoking the SCA-related rules that are set in legislation, paving the way for the FCA to replace the current SCA regime more broadly.

SCA refers to a two-factor authentication requiring the verification of a payment using at least two different methods under the following categories: 

• knowledge (e.g., a password or PIN “known” by the customer);
• possession (e.g., a mobile phone or card “held” by the customer); and
• inherence (e.g., a biometric fingerprint or face scan which is “inherent” to the customer).

Digital wallets, for example, convert payment card details into a “token” linking an actual payment card to a virtual one on the user’s device. These products do not require a PIN to be entered on a payment terminal because SCA can be applied through the use of a biometric. For this reason, digital wallets can support higher transaction limits for contactless payments than traditional cards (see also the FCA’s Feedback Statement, FS25/1: Big tech and digital wallets).

Contactless payments exemption

Article 11 of the SCA Regulatory Technical Standards, which are set by the FCA, allows an exemption from SCA for contactless payments. The exemption sets the following limits:

• £100 in any single contactless transaction; and 
• a cumulative total of £300 across several contactless transactions; or no more than five consecutive contactless transactions. 

Proposed changes to UK regime

Risk-based exemption

The FCA's first proposed reform – in the form of a new exemption – would allow firms with strong controls to set higher contactless limits to match evolving payer needs. In line with Consumer Duty requirements to consider the varying financial objectives of retail customers, under this option firms would need to take into account whether lower versus higher limits would benefit customers, who could be financially vulnerable or digitally excluded (among other differentiators).

Amending the contactless limits exemption 

Alternatively, the FCA is considering amending the existing contactless exemption by:

• removing contactless limits in legislation, giving PSPs and consumers full autonomy to set limits aligned with an individual consumer’s objectives, the PSP’s risk appetite and existing regulatory requirements (including the Consumer Duty);
• amending the single limit from £100 to £200 or higher (taking into account the cost of living), and potentially combining this with a requirement to apply a risk-based approach; or
• amending or removing the cumulative and consecutive limits (e.g. by increasing the cumulative total to £2,000).  

Consumer Duty 

As stated above, the FCA is weighing up the extent to which it can rely on outcomes-based rules, including the Consumer Duty, to regulate retail payments, such that firms will have more of a say in determining contactless limits while still needing to consider the financial objectives of their customers.

The FCA asks for input on whether it could achieve appropriate outcomes if it relied substantively on the Consumer Duty, potentially following legislative change. It is also interested in stakeholders' views on whether it would be better to delay acting until wider legislation changes are made, or to take forward measures on contactless limits in the interim under the existing framework.