The Coronavirus pandemic has prompted, accelerated, and enhanced myriad changes in business models and consumer behaviour, one such notable area being electronic payments.
The Financial Conduct Authority (FCA) is currently consulting on a further increase to the maximum contactless card payment limit, which was raised from £30 to £45 at the start of the pandemic. The increase being considered is a maximum of £120 although they state their preferred figure is currently £100.
The UK is far from alone in having increased the maximum limit for contactless payments in response to the pandemic. Most countries have. Whilst some of these increases have been relatively small, many have more than doubled their limits e.g. Croatia, Hungary, Qatar, Saudi Arabia, and Kazakhstan. A small number such as Mauritius and Belarus have gone as far as to quadruple their maximum contactless limits. With no real problems reported with the increases in any of these countries, the international evidence indicates there is little cause for concern with increases of up to 400%.
Indeed, the significant increase in contactless payments in the UK over the past 12 months, which has led to a substantially improved consumer experience and greater convenience has occurred without any corresponding increase in fraud.
The FCA is therefore right to consider an increase but will need to balance requirements for fraud prevention and security, against the needs of customer demand and convenience.
AAT members views
Taking such factors into consideration, AAT licensed accountants were this month surveyed for their views on the issue. The responses revealed that three quarters favour an increase.
A clear majority (62.5%) support a rise to £100 and a further 12.5% would prefer an even bigger increase to £120.
Just over a quarter (25%) would like to see the current £45 limit retained but it is also worthy of note that not a single respondent favoured a reduction below the current threshold, not even back to the £30 limit that was in place when the pandemic hit just 12 months ago.
As well as an increase to maximum contactless payment limits, there is a related issue to consider around cumulative payments. At present, contactless payments must be subjected to customer authentication i.e. entering a pin number, whenever a cumulative transaction value threshold of £130 has been reached, or after 5 contactless transactions have been made in a row without the pin number being entered.
Clearly a failure to change the cumulative transactions value threshold of £130 whilst increasing the general maximum contactless threshold to £100 or £120 would mean that the frequency with which customers have to reauthenticate would greatly increase. This would undermine the benefits of having a higher contactless limit and makes an increase essential if the overall limit is to rise. For that reason, AAT supports the FCA proposal to increase the limit from £130 to £200.
The average value of individual transactions using contactless payments in the UK is approximately £10 so a new cumulative limit of £200 would mean that, on average, a customer could complete 20 transactions before being required to provide their pin number to reset the transaction counters. 20 transactions should easily meet the needs of most individuals.
Convenience and Coronavirus
Requiring consumers to insert a card into a card reader and enter their PIN after numerous transactions, in order to limit fraud, is hardly the bureaucratic burden that some suggest and so concerns about transactions being aborted as a result are likely overplayed.
However, many consumers feel uncomfortable having to touch a pin pad in the current Coronavirus environment so these concerns, although temporary could still prove to be long lasting. This again demonstrates the need to balance the numerous competing interests in this area.
The contactless payments consultation is part of a wider consultation on a range of technical issues that is due to end on 30 April 2021. However, the two questions relating to contactless card payments require responses to be submitted by 24 February 2021. This indicates that a decision on this matter is likely to be taken very quickly.
AAT has already responded, providing a submission that was guided by its recent survey of AAT licensed members.
If you are an AAT licensed member and would like to take part in future surveys on these types of issues, please email email@example.com
Phil Hall is AAT's Head of Public Affairs and Public Policy.