Rise in contactless payment limit to boost the economy and the high street

The number of contactless payments made in the UK increased by 12% last year. This move away from cash was accelerated by the coronavirus (Covid-19) pandemic and aided by a limit increase of £15 on single payments from £30 to £45 in April 2020.

What has changed since the pandemic and what is changing as a result?

Contactless card transactions have risen from constituting 7% of all card payments in the UK to 27% in the past four years, according to figures from UK Finance. This significant jump was exacerbated by the onset of Covid-19. Indeed, 2020 saw the number of contactless payments rise by 12%, helped in part by a change of single payment limits from £30 to £45 (a 50% increase) at the beginning of April.

The number of debit card contactless payments has increased since the start of the pandemic from four in 10 in 2019 to six in 10 by September 2020. Moving forward, the Financial Conduct Authority (FCA) has decided to change its rules following a public consultation to adapt to “evolving consumer behaviour…the needs and expectations of consumers…and the changing ways in which consumers prefer to pay”.

This should coincide with a post-lockdown spending spree from consumers in a lift for the economy, which the OECD predicts will recover by 7.2% in 2021 and 5.5% next year. The CBI, meanwhile, anticipates an 8.2% growth in the UK’s GDP this year and an 6.1% growth in 2022.

At Worldline, Europe’s largest company in the payment services and fourth largest globally, we provide consumers, merchants, banks and financial institutions with trustworthy secure payment solutions.

How will this affect the consumer, merchants and banks?

Retailers and merchants will be able to make single payment contactless transactions of £100, up from £45, from 15 October 2021, whilst the number of multiple contactless transactions will rise from £130 to £300. Amidst the financial and banking communities putting the new systems in place there is widespread support for the new proposals and broad industry uptake of the new single payment contactless limit is anticipated.

For good reason too, as this new arrangement should secure the predicted growth dividend for the UK economy as it roars back. For retailers, merchants and consumers, some key positive effects will be seen.

• retailers/merchants- an opportunity for securing significantly higher sales volumes will be on offer, with greater operational and business efficiencies increased amidst a wider scope of application across greater-value market, industry and product sectors
• consumers- a higher limit will provide a faster, more flexible service for consumers at checkouts, leading to shorter queues and an improved choice of payment methods across many more retail products. Contactless payments in supermarkets during lockdown provided the consumer with a way to avoid non-essential contact to the benefit of everyone, and this increasing trend will be seen on a much broader situation basis for business and retail transactions.

Furthermore, an uptake in contactless payments has coincided with a reduction in fraud, which decreased to 3.3% of card scams in 2020, according to UK Finance. Here at Worldline, we are well versed in risk and regulation and have not only several secure payments solution options to suit your business, but a range of dedicated experts on hand to answer any qualms or queries you may have regarding fraud and regulation.

What might the reaction be moving forward?

Responding to the news, Chancellor Rishi Sunak was upbeat about the future. He said: "As we begin to open the UK economy and people return to the high street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth across the country."

Nonetheless, the card issuer faces the most risk with contactless payment transactions, as opposed to the customer or the business taking the payment, who are at low risk of fraud exposure. Merchants and consumers are, in many instances, not wary of this.

In the coming months, more and more UK consumers will use contactless payment transactions as the shift away from Chip and Pin continues. This will bring about smoother, frictionless shopping experiences for customers and more revenue for merchants as the economy bounces back from the limitations of the pandemic to promote digital innovation and market growth.