The Financial Conduct Authority (FCA) has reminded UK business and its payment community that it will close its feedback to its “Engagement Paper on Contactless Payments” today (9 May 2025).
The Engagement Paper was published by the FCA in March, in response to Prime Minister Keir Starmer’s call for “business regulators and regulatory policies to support growth in the UK economy”.
A key mandate of the Labour government, the PM seeks a response from regulatory agencies to help reverse the British economy’s lag in productivity since the financial crash of 2008. The government has marked-out key areas of improvement to enhance business investment, improve infrastructure, spending on R&D and to upskill the UK workforce and fill skill gaps.
The FCA has responded with its recommendations, in which it has proposed current contactless payment limits be re-evaluated to enable greater flexibility for payment service providers (PSPs), potentially allowing higher transaction thresholds or even removing limits altogether on the provision that strong fraud controls are in place by PSPs.
Needed support for contactless growth?
An estimated 85% of UK adults use contactless cards each month. However, the framework governing these transactions – particularly the £100 per-transaction limit and the cumulative £300 or five-consecutive-payment ceiling—has remained unchanged since 2021, even as retail prices, consumer behaviour, and technology have evolved significantly.
The FCA’s proposal seeks to explore whether more flexible approaches can be implemented to reflect the modern payment environment, while preserving security and trust. At the heart of this initiative is a simple trade-off: increasing convenience must not undermine consumer protection.
David Geale, the FCA’s Executive Director for Payments and Digital assets, said the consultation reflects a pivotal moment in UK financial regulation.
“We know that contactless payments are now embedded in daily life. With 85% of the population using them monthly, we have a responsibility to ensure the rules surrounding them are not just secure but proportionate, enabling innovation and improving experiences. This consultation allows us to ask whether the current limits remain suitable in today’s world—and if not, how we can evolve them responsibly.
“Our approach is not simply to deregulate, but to ensure the right safeguards are in place while giving firms the flexibility to innovate. Ultimately, a well-designed contactless payments regime can enhance trust in the financial system and contribute to a more productive, digitally confident economy.”
Why Now…
The FCA’s decision to review contactless payment limits is driven by structural changes in consumer behaviour and technological advancements. The growing use of digital wallets, such as Apple Pay and Google Pay which incorporate biometric authentication, has made these payment methods both more secure and more convenient than traditional cards.
At the same time, improvements in fraud detection mean that while contactless fraud rose to £41.5m in 2023, it remains small relative to the £708.7m in total unauthorised payment fraud, with a lower fraud-to-turnover ratio than other card types.
Other pressures include inflation, which has diminished the real-world value of the current £100 single-transaction limit, reducing the efficiency contactless payments are meant to offer. The FCA also noted a shift in regulatory philosophy: the government’s National Payments Vision and the Future of Payments Review favour more flexible, outcomes-based frameworks, signalling that static, one-size-fits-all limits may no longer serve the needs of a modernised payments ecosystem.
Proposed Options
The FCA has outlined three potential regulatory paths to reform contactless payment limits. One option is the introduction of a risk-based exemption, allowing payment service providers (PSPs) to determine their own limits for in-person transactions, provided they can demonstrate low fraud rates through robust transaction risk analysis. This model mirrors existing exemptions used for online payments and would offer greater flexibility to PSPs with strong fraud prevention controls.
Another approach would see amendments made to the current limits, such as raising the single transaction threshold to £200 or more and potentially removing the cumulative and consecutive caps. These adjustments could be coupled with stricter fraud monitoring.
A third path involves relying on Consumer Duty within the regulatory framework—shifting responsibility onto firms to ensure services are tailored to individual customer needs, particularly for vulnerable or digitally excluded groups. This route, however, would require legislative change before implementation.
Resistance & Caution
Despite support for reform from fintech firms and segments of the retail sector, not all stakeholders are convinced. Critics warn that removing caps could increase fraud exposure, particularly for those using traditional cards without biometric authentication. Unlike digital wallets, contactless cards are vulnerable to theft and misuse, as possession alone permits low-value transactions.
Sam Riordan, Executive Director of Banking and Payments at consultancy Capco, expressed caution about deregulation: “While removing the £100 limit may seem like a natural evolution of payments, we must consider the practical and behavioural implications for a wide spectrum of consumers. Contactless cards offer speed and simplicity, but they do not inherently offer the same security features as mobile wallets. If we raise or remove limits without robust fraud safeguards, we risk undermining consumer confidence in the system.
“Spending caps are not just about risk management—they help reinforce financial discipline, particularly for more vulnerable or less digitally-savvy customers. Any regulatory changes must be accompanied by strengthened fraud analytics, proactive monitoring, and a framework that ensures liability for unauthorised payments is transparent and fairly managed.”
Next Steps…
The FCA has yet to indicate which option it will favour, but the tenor of its engagement suggests an appetite for reform—particularly in giving PSPs greater discretion where robust anti-fraud mechanisms exist. The regulator will assess feedback before launching a formal consultation later in 2025.
