The City regulator is paving the way for shoppers to make larger contactless payments, moving beyond the current £100 transaction limit for physical cards.

Under new plans from the Financial Conduct Authority (FCA), set for next year, banks and payment providers with robust fraud controls will gain autonomy to establish their own payment thresholds.

These regulatory changes are scheduled to commence on March 19, though individual firms will decide when to adopt the flexibility.

Firms that go ahead with the changes will need to communicate them clearly to their customers, the regulator said.

The aim is to allow firms to better respond to changing consumer demands, inflation and new technology.

Firms are also being encouraged to let customers set their own limit, or turn contactless off altogether, as many high street banks already do.

The popularity of contactless payments has surged over the years, with contactless card transactions limits having previously been increased in a series of steps.

According to consumer spending data from Barclays, 94.6 per cent of eligible in-store card transactions were contactless in 2024.

Last year, there were 10 times as many contactless transactions per month than there were in 2015, according to Barclays.

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As well as a £100 limit for a single contactless card transaction, there is also a cumulative total of £300 in contactless transactions, or no more than five consecutive contactless transactions, since the last application of “strong customer authentication” to verify a payment was made.

Under the rule change, firms will also have the flexibility to consider changing the cumulative contactless approach if they want to.

The FCA believes the option of greater flexibilities will incentivise firms to step up their fraud prevention, giving consumers greater protection.

Existing protections will remain in place, meaning consumers must be reimbursed in unauthorised fraud cases, such as if their card is lost or stolen.

The review of the contactless card limit was one of around 50 measures the regulator outlined in a letter to Prime Minster Sir Keir Starmer in January to help support economic growth.

The proposals were out for consultation until October 15. The regulator has previously said that, based on industry feedback, it anticipated most firms would continue to implement the £100 limit for the time being.

David Geale, executive director of payments and digital finance at the FCA, said: “Contactless is people’s favoured way to pay. We want to make sure our rules provide flexibility for the future, and choice for both firms and consumers.”

Kate Nicholls, chairwoman of UKHospitality, said: “Making life easier for consumers is a positive for any hospitality and high street business, and I’m pleased the FCA is bringing forward this change.

“Contactless has increasingly become the preferred payment method of choice for many people and lifting the limit can mean quicker and easier experiences for consumers. While many people still prefer to use cash or chip and Pin, this change adds much-needed flexibility for providers and consumers.”

Jana Mackintosh, managing director of payments and innovation at UK Finance, said: “We welcome the FCA’s move to give banks and payment providers greater flexibility over contactless limits in the future.

“Contactless is a very popular and secure way to pay.

“While we do not expect to see any immediate change to the £100 contactless limit, any changes made in the future will be done carefully and ensure strong security and fraud controls remain in place.”