The UK’s financial watchdog has proposed a shake-up of contactless payment rules, allowing card issuers greater flexibility to raise or remove the £100 transaction cap.

Under the plans announced by the Financial Conduct Authority (FCA), firms would no longer be bound by the current single-payment and cumulative caps, which stand at £100 and £300 respectively. Instead, providers could tailor limits based on their own risk assessments, as long as fraud remains low.

“We propose replacing the current regulatory limits with a new exemption, which would allow (payment services providers) to process contactless payments where they identify the risk of a payment transaction to be low,” the FCA stated in its consultation document. “(Payment services providers) can still set or maintain contactless payment limits as they see fit in line with their business and customer needs and in compliance with regulation.”

The proposal is part of a broader review aimed at modernising payment systems in the UK. David Geale, executive director of payments and digital finance at the FCA, said: “We’re seeing smarter payment technology and more well-established fraud controls, so it’s the right time to let firms tailor contactless payments to fit their customers’ needs and drive innovation.”

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He added: “While we wouldn’t expect to see immediate changes to limits by firms, they would have the flexibility to make payments more convenient for customers. People are still protected. Even with contactless, firms will refund your money if your card is used fraudulently.”

When contactless card payments were introduced in 2007, the transaction limit was set at £10. The limit was raised gradually, to £15 in 2010, to £20 in 2012, then to £30 in 2015, before the COVID pandemic prompted a jump to £45 in 2020, then to £100 in October 2021. If approved, the latest plan could be put in place early next year.

However, consumer feedback to the regulator has revealed widespread reluctance to raise the cap. The FCA noted that “a significant number of members of the public wrote in to support keeping the contactless limits at their current level, particularly expressing concerns around the potential impact on fraud.”

Among the nearly 1,300 responses to the FCA’s earlier engagement paper, 78% of consumers said the £100 single limit should be maintained. A separate survey by Opinium for UK Finance showed 76% of respondents agreed, with 82% of transactions currently under £25, and more than 90% under £50, according to UK Finance data.