The FCA has confirmed it is changing its rules to increase the single-transaction contactless payment threshold from £45 to £100. The aggregate threshold for multiple consecutive transactions is also increasing, from £130 to £300.
These changes follow a consultation, concluded on 23 February, in which the FCA sought input on whether changes to contactless thresholds would reduce the potential negative impacts of some of the requirements imposed by SCA-RTS.
The FCA has now updated Article 11 of SCA-RTS to introduce the new higher contactless payment thresholds.
The change creates both opportunities and threats for the financial services industry. Opportunities come in the form of improved experiences for customers and merchants, particularly in the context of the current Covid-19 pandemic. Enabling consumers to use their payment cards more, and cashless minimise personal contact in the retail environment and helps control transmission.
On the other hand, increasing the contactless payment threshold will also encourage fraudsters who target vulnerable consumers and households. According to official figures, eight out of ten people in the UK used contactless payments in 2019. Raising the limit inevitably increases the scope for fraudsters to spend other people’s money using stolen cards – without the need to enter a PIN.
A number of leading financial services sector commentators have voiced concerns over a potential increase in theft, urging POS machine providers to work faster on identifying potentially suspicious contactless payments.
Financial services firms can address this issue with their own customers by providing built-in features that set spending limits or send SMS confirmations after each transaction is executed.
The FCA expects banks to refund any suspicious transactions made from their customers’ accounts. Card issuing institutions should take steps to enhance their transaction monitoring. An improved ability to detect and identify unusual activity can help avoid additional costs.
To protect customers from fraud, payment services providers should ensure their internal financial crime and fraud detection controls are resilient. Heads of compliance departments need to work with industry experts to update their policies on financial crime and compliance. Improved governance will be needed to provide enhanced protection for payments services users.
“While increasing the threshold does make sense given the increase in non-cash payments since the beginning of the current pandemic, financial institutions that issue cards will inevitably face challenges to ensure that the change doesn’t make customers more vulnerable to fraud.”
Jack Williams – Payment Services & Financial Crime Manager
If you’d like to know more about how we can help with your transaction monitoring and how this affects your ongoing reporting to the FCA our expert team is here to help.
Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.