Rishi Sunak will more than double the limit shoppers can splash out using contactless cards and phones to £100 today – giving a big boost to retailers as the economy unlocks again.
It puts bigger ticket items and little luxuries, from smart shirts to hampers, in range of instant payments that do not even require a signature or even a pin number.
It is the second rise in the limit, which went up from £30 to £45 last spring.
In his Budget this afternoon, the Chancellor will point to the booming popularity of “pinging” payments during the Covid-19 pandemic, as shoppers and retailers shunned cash which might carry the virus.
Experts at the Treasury believe easier transactions will give an extra shot in the arm to the struggling London retail sector, worth over £31 billion, when it is allowed to open, helping to support jobs and businesses.
“London’s retail sector is famous across the world, with Oxford Street, Covent Garden and Westfield seen as global destinations for shopping,” Mr Sunak told the Evening Standard ahead of his statement to the Commons.
“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 capital.”
Contactless payments were brought in as a handy substitute for cash when buying small items. But they caught on quickly and can now be used everywhere from boutiques to restaurants, and even parking meters, buses and the London Underground.
The rise in the legal limit from £45 to £100 is only possible because of Britain’s exit from the European Union, which sets the cap for member states.
At the start of the Covid-19 pandemic, four out of 10 debit card payments were made using contactless. That rose to six in 10 by September last year.
Mr Sunak’s announcement will form part of the Government’s new Plan for Jobs. Retail is one of London’s biggest sectors for jobs. In 2020 there were 40,125 retailers trading and operating within Greater London, employing up to 416,000 people. The sector makes up almost eight per cent of the value of goods and services in the entire London region.
Although the new limit will become law immediately, shoppers will not notice any changes yet because firms need time to update their systems. The banking industry is due to implement the new £100 limit later this year.
Andrew Cregan, Payments Policy Advisor at the British Retail Consortium, welcomed the “enhanced payment flexibility” but said customers walking away before contactless payments were completed – often accidentally – was “costing retailers millions in lost revenue”.
Nick Fryer, Chief Technology Officer of Dojo, part of the Paymentsense brand, said the decision showed “clear logic” that bigger payments would lead to more spending “therefore helping business’ and sectors back up and running”. The old limit, he said, was below the average supermarket spend.
Many other major economies including Australia, Canada and the US already have limits close to £100. In the US it is $200, or around.£145.
The higher limit was recommended by the Financial Conduct Authority after a public consultation which revealed enthusiasm to use them even more. The extra fraud when the limit rose to £45 amounted to a mere 0.2 per cent of the sums spent with contactless cards – but the reform generated 350 million extra contactless transactions that would previously have been made with chip and pin cards.
As an anti-fraud measure, after five consecutive contactless payments, customers are asked to provide their PIN (personal identification number). The amount that can be spent across the five payments will now be raised to £300.
Treasury officials made clear Mr Sunak is committed to protecting people’s access to old-fashioned cash. Under plans floated in October, stores would allow people to take cash as “cashback” – by swiping a card – without having to make a purchase.
Source: Evening Standard