With the FCA handing control of contactless limits to banks, industry voices say execution, and fraud prevention, not higher limits, will define success.
The UK’s Financial Conduct Authority (FCA) has confirmed it will remove the existing regulatory cap on contactless card payments, handing banks and payment providers greater control over how limits are set.
Under the updated rules, announced today (December 19), firms with ”strong fraud” prevention and risk management controls will be able to determine contactless thresholds, rather than operating under a uniform ceiling.
Providers will also be encouraged to give customers greater configurability, including allowing them to set personal limits or disable contactless functionality altogether.
As part of its statement on the change, the FCA cited research from Barclays which found nearly 95% of all eligible in-store card transactions in 2024 were made using contactless.
“Contactless is people’s favoured way to pay. We want to make sure our rules provide flexibility for the future, and choice for both firms and consumers,” said David Geale, Executive Director of Payments and Digital Finance at the FCA.
The FCA explained the changes are designed with the aim of modernising payments regulation by moving away from prescriptive rules and enabling firms to respond more dynamically to inflation, changing transaction values and advances in fraud detection technology.
The update follows an FCA consultation on contactless payments, with changes set to take effect in March 2026 after which firms will decide if and when to adjust contactless limits.
Power shifts to banks and payment providers
The FCA’s announcement is a significant change to how contactless payments are regulated in the UK. Until now, firms were required to operate within a defined contactless limit, applying the same threshold across the market regardless of individual risk models or fraud capabilities.
Under the new approach, banks and payment providers with strong fraud controls will be able to set their own contactless limits, or allow customers to define their own. Across the payments industry, the change is being viewed as a clear sign the regulator is moving away from prescriptive rules and placing greater responsibility on firms to manage risk internally.
In comments sent to Payment Expert, Chris Jones, Managing Director at PSE Consulting, explained just what this change in strategy means from the regulator.
“By lifting the contactless cap, the FCA is stepping away from a blunt, one-size-fits-all rule and putting the onus on banks and card providers to manage their own risk exposure levels,” Jones said.
“That significantly raises the bar for the industry. Higher or unlimited contactless only works if firms have robust fraud detection, real time transaction monitoring and strong customer controls in place.”
The decision may come as a surprise to some, given the UK, like many markets as of late, has faced rising fraud rates in recent years. It isn’t illogical to see how higher or unlimited contactless limits could be seen as increasing the amount of money available to scammers.
However, the flexibility will only be available to firms which can demonstrate strong fraud controls. While it remains unclear which providers will qualify initially, the change may prompt some banks and issuers to accelerate investment in fraud prevention technologies in the months ahead.
“The technology already exists, but adoption is uneven,” Jones said. “Providers that invest in behavioural analytics and dynamic risk scoring will be able to move faster and with confidence.”
Why execution will matter more than limits
Joe Minett, Product Manager for Cards Issuing at payabl., and Jones both stressed the real differentiator will not be higher contactless limits themselves, but how effectively firms use the regulatory change to build trust, transparency and control.
“For consumers, the real win is not higher limits, but greater control,” Jones said. “Being able to set personal thresholds, switch contactless on or off instantly and manage settings through an app delivers far more value than mandating a simple ceiling.
“Banks that rush to increase limits without clear safeguards and communication risk eroding confidence and attracting scrutiny from both regulators and customers.”
Minett highlighted the commercial implications for merchants and payment providers, noting reduced friction at checkout can support sales and customer satisfaction, particularly in high-volume retail and hospitality environments.
“Greater convenience is welcome, but we must make sure that raising or removing limits doesn’t inadvertently lead to higher fraud risk or put vulnerable consumers at a disadvantage,” Minett said.
“Transparency, education and strong safeguards will be essential. From a business perspective, reducing friction at checkout can help boost sales and customer satisfaction, but businesses will need to update terminals and communicate changes clearly to shoppers.”
