The Financial Conduct Authority has now confirmed that it will change the threshold for contactless payments from £45 to £100. The FCA has pointed to the increased use of contactless payments during the pandemic as cash has fallen out of favour with consumers and businesses. The new rules are aimed at helping the industry and providing a more convenient experience for consumers.
This latest increase follows a smaller increase last April when the FCA raised the contactless limit from £30 to £45. However, while the measure aims to make spending simpler and more convenient for consumers, not everyone is enthusiastic about the changes.
How do consumers feel?
We ran a poll through our Twitter account, asking, “One year on from the UK’s national lockdown and we are expecting an increase in the contactless limit to £100. Do you think this is a good idea?” The result was that 42.1% voted yes, and 57.9% voted no. While this opposition might be surprising to some, it tracks with similar polls conducted since the widespread introduction of contactless cards.
Banks introduced contactless cards to make spending in shops faster and more convenient for consumers. But, as any security expert will tell you, convenience often comes at a cost. Since the introduction of contactless cards, consumers have had concerns about the potential for fraud. If you drop a regular bank card and someone picks it up, they can’t use it without knowing the PIN. There’s no authentication with contactless cards; anyone can use a contactless card if they remain within the spending limits.
One respondent to our poll summed up how many felt with their comment, “It takes 4 seconds to type in a pin (sic) for safety. [They’re] Making it too easy for crooks by upping the limit.”
The only security measure contactless cards offer is to occasionally ask the user to insert their card and pay via chip and PIN.
Are these fears justified?
Despite the widespread belief that increasing the contactless limit will lead to an increase in fraud, this hasn’t been the case in the past. Admittedly, this is the biggest increase in the spending threshold since contactless payments were first introduced. Still, previous increases in the spending limit haven’t led to a measurable rise in fraudulent spending.
Based on some of the responses we received following our Twitter poll, consumers are unaware of the protections in place should someone use their card without permission. If your card is lost or stolen and someone spends money on it before you have a chance to cancel it, your bank in most cases will reimburse the losses, provided you haven’t been negligent.
From the feedback on our Twitter poll part of the problem is that banks have encouraged contactless cards on many of their customers without consulting them on whether they want one or explaining the potential merits and drawbacks of the technology. As a result, consumers are unaware that their money is protected. In fact, contactless cards offer more protection than physical cash; if you withdraw £100 from your bank and lose it, its not traceable and it’s gone for good. If someone spends £100 using a contactless card, in most cases your bank will refund the money.
Convenience and security
Consumers love convenience. Enabling faster checkout processes in-store and online makes things easier for consumers; no one has ever complained that it was too easy for them to pay for what they need. The buzz word “seamless” is frequently used within the payment industry. Consumers want a “Seamless” checkout. However, consumers do not want “speed” and a “seamless” checkout at the expense of their security.
The speed and convenience of contactless cards are popular with consumers, but it appears from our Twitter poll that the lack of official communications offering safeguarding advice around the limit seems to be causing concern. Given how quick and easy it is to enter a PIN, the trade-off doesn’t seem worth it to many who took the poll. As some of our respondents pointed out, contactless payments using NFC-enabled smartphones offer both convenience and security. For example, iPhones enable contactless payments using Apple Pay. Because Apple Pay uses the user’s fingerprint for authentication, users can spend as much as £500.
How can we make consumers feel safer?
There are multiple methods payment processors can use to authenticate online transactions and counter fraud. Address Verification Service, Card Verification Value, Device Identification, and 3-D Secure Payer Authentication effectively identify and prevent fraudulent transactions, but when it comes to in-store purchases, verification is more difficult.
The general opinion from our poll, is that Banks tend to be strategically vague with regards to their stance on fraudulent transactions connected to the increase in the new contactless limit. While consumers are concerned about fraudulent spending using their cards, banks could be also concerned about dealing with fraudulent claims. We received a response to our poll from a bank employee who said, “I work for a bank, and I feel that [the spending threshold] should have been left at it’s (sic) original limit of £15. Chip and PIN for any higher amount. [It’s] too open to fraud, and baseless claims.” While banks have a legal obligation to refund customers whose money is spent fraudulently, provided there’s no negligence, they don’t want to make it seem too easy to reimburse transactions.
However, were the banks to play ball with the payment processing industry, there would be numerous fraud prevention avenues to explore. Risk scoring is gaining popularity and becoming more sophisticated by the day. Risk scoring uses numerous data points and machine learning algorithms to assess the probability of a transaction being fraudulent.
Increased data sharing between banks and payment processors would undoubtedly make fraud prevention easier. For example, if a customer’s contactless card is used to make a payment a long way from the address registered with their bank, the payment terminal could automatically prompt them to enter their PIN. Once they’ve authenticated the transaction, they can use their contactless card in nearby shops without further authentication.
While the new contactless limit is unlikely to lead to a surge in fraudulent claims or transactions, we cannot ignore consumer’s fears and perceptions. New technologies will be needed to increase consumer confidence and allay their fears. But until then, we need greater transparency, so that consumers, merchants, and payment processors understand their liability and protection.
If you’re looking for a safe and secure payment solution built around your needs, contact MultiPay today.
