The Financial Conduct Authority (UK) is undertaking a comprehensive review of the current framework governing tap-to-pay transactions, considering potential reforms that range from increasing the established £100 limit to the more transformative option of eliminating transaction ceilings altogether. This initiative forms part of a broader regulatory adjustment designed to modernise the UK’s payment systems, promote economic fluidity, and empower consumers with greater autonomy. The FCA is actively engaging with the public and industry stakeholders to gather input on these proposed modifications, setting a submission deadline of May 9, 2025. The regulator emphasises that this review aims to provide “enhanced user agency” by enabling individuals, payment processing entities (PPEs), and businesses to customise tap-to-pay thresholds to meet their specific needs, while simultaneously mitigating the risks of fraud.
Since its introduction in 2007, contactless payment technology has significantly altered the landscape of financial transactions in the UK. Data from UK Banking Trends reveals that 85% of UK residents utilise tap-to-pay at least once per month, demonstrating its prevalence across retail and service sectors. Current regulations stipulate a single tap-to-pay transaction limit of £100 and an aggregate cap of £300 across multiple transactions, or a maximum of five consecutive tap-to-pay interactions before requiring user authentication via PIN or biometric verification. As digital payment adoption continues to expand and consumer expectations evolve, the FCA’s review seeks to achieve a balance between convenience, security, and regulatory oversight in an increasingly cashless economy.
One option under consideration is increasing the £100 cap, which would allow consumers to make higher-value purchases without the need for PIN authentication. This adjustment could benefit businesses, particularly in sectors such as hospitality, travel, and high-end retail, by facilitating faster transaction speeds and enhancing the customer experience.
However, this change would necessitate robust fraud-monitoring mechanisms to prevent unauthorised transactions. Alternatively, the RFA is contemplating the more radical proposal of eliminating the cap entirely, which would enable PPEs to set individualized limits for users based on their transaction history and risk profile. This flexible approach would align with practices in North America, where some banks offer dynamic tap-to-pay limits tailored to customer spending patterns. Nevertheless, critics caution that removing limits may increase the risk of fraud and require stronger authentication protocols, potentially diminishing the convenience factor.
Furthermore, the FCA is considering risk-adjusted exemptions that would grant leniency to firms with demonstrably low fraud rates. Businesses employing advanced AI fraud detection could be permitted to offer higher transaction limits, effectively linking security performance to regulatory flexibility. Another potential approach involves relying more heavily on the Customer Protection Mandate (2023), which would delegate responsibility to financial institutions to maintain high security standards while offering increased consumer flexibility, rather than setting rigid regulatory thresholds. This shift would move from prescriptive rules to a more principles-based approach, ensuring that financial institutions prioritize consumer well-being.
The proposed modifications present both advantages and challenges. Enhanced consumer convenience, economic stimulation, alignment with global standards, and potential for innovation are among the key benefits. However, concerns regarding increased fraud risk, financial exclusion, complex implementation for merchants, and potential inconsistency across providers must be carefully addressed. Any reform must comply with existing consumer protection regulations, including FCA guidelines, Payment Services Regulations 2017, and the Customer Protection Mandate (2023). From a technical perspective, increasing tap-to-pay limits would necessitate strengthened encryption protocols, AI-driven fraud monitoring, and consumer education initiatives.
The FCA is actively soliciting input from consumer advocacy groups, financial institutions, payment processors, retailers, and the general public, with a submission deadline of May 9, 2025. Julian Davies, Director of Digital Transactions at the FCA, emphasised the importance of evaluating how to enhance security and convenience while maintaining public trust in digital payments. Minister for Financial Affairs, Sarah Jenkins, highlighted that the FCA’s review aligns with the broader strategy to modernize financial systems, drive economic growth, and ensure transactional flexibility for citizens. The FCA has reaffirmed its commitment to consumer safeguards, ensuring that existing regulations mandating reimbursement for unauthorised transactions will remain in effect.
While the potential for increased consumer choice and business efficiency is promising, the associated risks, including heightened fraud exposure and implementation challenges, must be carefully considered. The consultation process will play a crucial role in shaping the future of contactless transactions, balancing innovation with security and consumer protection.
