Academics suggest that an increase or complete removal of contactless payment limits could lead to a rise in impulsive spending.
Currently, the requirement for a PIN for purchases exceeding £100 serves as a conscious reminder of the transaction amount, mitigating the risk of debt accumulation.
Earlier this week, the UK’s Financial Conduct Authority (FCA) proposed allowing banks and card providers to set their own limits or eliminate them altogether, potentially making PIN entry even less frequent.
Banks, along with some BBC readers, advocate for consumers to have the ability to set their own contactless limits, a point of discussion that is gaining traction as a final decision approaches later in the year.
Contactless payments have become a ubiquitous feature of daily life for millions worldwide.
Since their introduction in the UK in 2007, the transaction limit began at £10, with subsequent increases, including notable jumps during the pandemic, reaching £45 in 2020 and then £100 in October 2021.
These increases corresponded with surges in the average contactless spending.
Undoubtedly, the average spending would rise as more higher-value purchases could be made via contactless without a PIN.
However, it remains challenging to quantify whether individuals are spending more frequently and in larger amounts than they would if PIN entry were required.
Richard Whittle, an economist at Salford Business School, notes that the added convenience for consumers may come with potential downsides.
“If this ease of payment leads to consumers spending without thinking, they may be more likely to buy what they don’t really want or need,” he states.
He suggests that this could be particularly relevant for credit card users, as they are spending borrowed money and accumulating debt. He proposes that regulators consider different rules for contactless credit cards compared to debit cards.
Stuart Mills, an economics lecturer at the University of Leeds, argues that cash provides “visible and immediate feedback” on available funds, while a PIN serves as an “important friction point” for managing spending.
“Removing such frictions, while offering some convenience benefits, is also likely to see many more people realising they’ve spent an awful lot more than they ever planned to,” he says.
Both academics have previously expressed this concern, emphasizing that this is not merely a theoretical argument.
In Sevenoaks, Kent, shopper Robert Ryan told the BBC that entering a PIN “does give me a bit of a prompt to make sure I’m not overspending on my tap-and-go”.
However, for many individuals facing cost-of-living pressures, spending over £100 in a single transaction is infrequent, making contactless the prevalent norm.
Research from Barclays indicates that nearly 95% of eligible in-store card transactions were contactless in 2024.
Terezai Takacs, a florist in Sevenoaks, observes that customers have been reducing spending over the past couple of years, such as requesting smaller bouquets.
Ms. Takacs also notes that most customers now use digital wallets on their smartphones.
These payment methods already have unlimited transaction limits due to enhanced security features such as fingerprint or facial recognition.
Dr. Whittle suggests that the rising contactless card limit is likely to mitigate the impact on spontaneous or reckless spending, particularly among younger demographics who prefer phone payments.
Some argue that eliminating the contactless card limit is overdue, as it becomes less relevant in a context where people are accustomed to PIN-free spending on their phones.
“Regulators are finally catching up with how people actually pay,” says Hannah Fitzsimons, CEO of fintech company Cashflow.
“Digital wallets on smartphones face no limits, so why should cards be stuck in the past?”
Increasing or removing the contactless card limit would position the UK ahead of much of Europe, aligning it more closely with regulations in other advanced economies.
In Canada, the industry sets the level instead of regulators, and providers do so in the US and Singapore – a model the FCA aims to replicate in the UK.
Banks concur with the regulator, although UK Finance, the industry trade body, states that “any changes will be made thoughtfully with security at the core”.
Banks and card providers that alter limits will be encouraged to allow customers to set their own thresholds or disable contactless payments entirely on their cards.
Gabby Collins, payments director at Lloyds Banking Group, notes, “Lloyds, Halifax, and Bank of Scotland customers can already set their own contactless payment limits in our apps – in £5 steps, up to £100 – and we’re absolutely committed to keeping that flexibility.”
This option is supported by some BBC readers, viewers, and listeners who contacted us on this topic through Your Voice, Your BBC News.
Ben, aged 36, from London, shared, “The most important principle here is personal choice. I would like to set my own personal limit.”
“It is my card and my choice based on convenience and risk tolerance. Some banks do not allow for this. This option has to be provided to everyone.”
Others have security concerns, arguing that unlimited contactless cards would become more enticing to thieves and fraudsters.
Charities caution that not everyone possesses the digital skills to set their own limits. In certain circumstances, this can have severe consequences on people’s lives.
Sam Smethers, chief executive of Surviving Economic Abuse, warns that unlimited contactless cards provide controlling partners with opportunities for limitless economic abuse.
“Unlimited contactless spending could give abusers free access to drain a survivor’s bank account with no checks or alerts,” she says.
“This could leave a survivor without the money they need to flee and reach safety, while pushing them even further into debt.”
She also cautions that it could accelerate the transition towards a cashless society.
Cash is a lifeline for many survivors because it is the only way to escape abusers who can monitor online transactions, withhold bank cards, and close down bank accounts, she says.
Additional reporting by Andree Massiah
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