FCA move to lift £100 contactless PIN limit draws sharp warnings over fraud risk

The Financial Conduct Authority has proposed removing the current £100 single-transaction limit on contactless card payments that can be completed without a personal identification number, a change that could be introduced as early as next year if taken forward.

Under the regulator’s proposals, payment providers would be permitted to process purchases above £100 without a PIN provided those transactions are identified as low risk. The FCA says greater flexibility could improve consumer payment journeys and have secondary benefits for growth, but consumer groups and many industry respondents warn the change could increase fraud and theft.

The move is part of a wider set of measures the FCA has explored in recent months. FCA chief executive Nikhil Rathi outlined the proposal in a letter to the prime minister earlier this year and followed up with an engagement paper that described potential benefits of smoother payments. The regulator acknowledges most consumers currently use contactless for low-value purchases: Barclays data cited by the FCA shows shoppers used contactless on average 236 times a year and that the average contactless purchase last year was about £16.10.

Nevertheless, the FCA’s own consultation materials note strong resistance to change. More than three-quarters of consumers who responded to the March engagement paper preferred to retain the existing single-payment £100 limit and the £300 cumulative threshold before a PIN is required. A majority of banks and payment processors that replied also opposed the change, citing concerns about potential increases in fraud.

Industry bodies and consumer advocates have been vocal. UK Finance, a banking lobby group, said the current £100 limit is "the right amount for now." Rocio Concha, director of policy and advocacy at consumer group Which?, said regulators and industry must work together to ensure "fraud controls are applied properly to protect consumers." Consumer campaigner Martyn James warned of a "huge increase" in thefts targeting wallets, purses and bags if contactless limits are raised.

The FCA has estimated that relaxing the single and cumulative contactless limits could increase contactless payment fraud by up to 131% over the next three years. The regulator’s engagement paper sets out a risk-based approach in which providers would need to demonstrate that elevated-value contactless transactions are low risk before processing them without a PIN.

Banks and payment firms have argued that authentication technologies built into digital wallets on smartphones and wearables are already suited to higher-value transactions, and that contactless cards have historically been used for low-ticket purchases. Respondents to the FCA’s consultation also cautioned that removing or raising limits could shift criminal activity toward opportunistic thefts and make disputes and refunds more disruptive for consumers.

Contactless payments have been in wide use for nearly two decades and are praised for speed and convenience. The current regulatory framework typically allows single contactless transactions up to £100 and a cumulative total of £300 before a PIN is required. The FCA’s proposed change would not automatically eliminate authentication for higher-value payments; instead, it would permit firms to rely on transaction risk analysis and other fraud controls to approve higher-value contactless transactions without PIN entry.

How the proposals progress will depend on further FCA consultations and industry implementation of controls the regulator requires. If the rule change is pursued, the FCA indicated it could come into effect next year, subject to final policy decisions and any required legislative or systems changes.

The proposal has prompted debate about the balance between consumer convenience and fraud prevention. Supporters point to potential gains in transaction speed and reduced friction for in-person sales, while critics say current usage patterns and industry feedback show little appetite for loosening limits and that the risks to consumers and merchants are material.

The FCA’s consultation documents and engagement paper outline the next steps for stakeholders to respond. The regulator has said firms choosing to adopt higher contactless thresholds would be required to apply and demonstrate effective fraud controls as part of any implementation.

Reporting on the FCA’s policy work continues as the regulator and industry weigh operational safeguards, consumer protection measures and the potential economic effects of altering long-established contactless payment limits.