In the wake of COVID-19, governments and credit card issuers have increased contactless payment limits to reduce friction at the point of sale. This move is in response to consumer demand for speed, convenience, and security in their payment methods. As a result, contactless payments are becoming increasingly popular due to their ease of use—all you need is a tap of your card or phone!
But when and why do contactless limits matter, and what are its implications for businesses and consumers? This article will discuss all of that and more as we explore the world of contactless payments.
What are Contactless Payment Limits?
Contactless payment limits—also known as CVM (cardholder verification method) limit—is the maximum amount that can be spent in a single transaction without requiring a PIN or signature. These limits are in place to help reduce fraud and protect consumers.
Each country sets its own contactless limit, and these limits can vary depending on the type of card being used. There are also instances where this limit leaves it up to the issuing or acquiring bank to determine the limit for their cards.
In the United Kingdom, the contactless limit was raised from £30 to £45 in April 2020 in response to the COVID-19 pandemic. However, the UK was not the first country to make this change—Australia, Canada, and New Zealand had all increased their limits in the months prior.
The US has seen a similar trend, with major issuers such as American Express, Chase, and Citi increasing their contactless payment limits. American Express was the first to make the change, increasing its limit from $30 to $80 in May 2020.
How Contactless Limits Impact Both Business & Consumer
There are a few reasons why contactless limits matter, both for businesses and consumers:
For businesses, having a higher limit helps to reduce friction at the point of sale. This is especially important in high-traffic areas or during busy times, such as the holiday season. A higher limit also helps to reduce queues and waiting times, as customers can complete their transactions more quickly.
For consumers, a higher contactless limit offers more convenience and flexibility in spending their money. It also helps to reduce the need for cash, which is an important consideration in the current climate.
What Are the Implications of Higher Contactless Limits?
There are a few implications of higher contactless limits that businesses and consumers should be aware of:
For businesses, it’s important to ensure that your POS (point of sale) system can accept contactless payments of the new limit. If you’re not sure, check with your provider or acquirer. You may also need to update your signage and marketing materials to reflect the new limit.
A higher limit means that you can use your contactless payment method for more expensive purchases for consumers. However, it’s important to remember that your contactless limit is not unlimited. If you try to make a purchase that exceeds the limit, you will be asked to enter your PIN or sign for the transaction.
Impact of Contactless Payment Limits in Both the US and The UK
To further understand the significance of contactless payment limits, it is insightful to explore the impact of recent changes in both the United States and The United Kingdom.
Contactless Payment Limit Hike in the UK
According to UK Finance, cash now only makes up 23% of transactions in the UK and has now dropped to third in popularity behind debit cards and credit cards, respectively. In addition, contactless payments now account for more than half of all UK-conducted transactions.
So, with the trend gearing towards the normalization of cashless payments, the UK’s Financial Conduct Society (FCA) proposed an increase in the contactless limit to £100. As mentioned earlier, the pre-covid limit was only £30 before increasing to £45 in April 2020 in response to the outbreak of COVID-19.
This trend has led to a surge in contactless card payments, increasing the average transaction value. This increase brought by the FCA has fully normalized cashless payments in the UK and has even surpassed contactless card limits in other countries like Australia, Canada, and New Zealand.
But while this increase has also brought a lot of benefits to consumers, it also increased the risk of fraudsters. This is because contactless payments are more vulnerable to skimming than chip-and-pin transactions.
For context, contactless fraud represents only 2.5p in every £100 spent in the UK. However, this number is likely to rise as contactless spending frequency increases, and the FCA proposes an upcoming new limit increase.
Contactless Payment in the United States
As of the moment, neither the US nor Canada has set contactless limit measures. Instead, the US government left this to the discretion of the financial institutions and card schemes. So, while there are no federal limits in place, some retailers and card issuers already have their own contactless payment limits.
In the US, for instance, Mastercard, Visa, and Discover have set their limits at $100, with American Express at $200. On the other hand, Canada has Visa, Mastercard, and American Express set their limits at CA$250, while Interac limits at CA$100. For retailers, Apple Pay has a $30 per-transaction limit while Google Pay is capped at $100.
In addition, most US banks have not increased their contactless payment limits in response to the pandemic. However, some have begun to raise their limits or are in the process of doing so.
For example, JPMorgan Chase is currently in the process of increasing its contactless payment limit from $50 to $100 for customers with a Chase debit or credit card. Bank of America has also announced plans to raise its limit from $50 to $100 but has not implemented the change.
Citibank has raised its limit to $200 for customers who use an iPhone with Apple Pay, while those using an Android device with Google Pay can spend up to $100.
What Does Contactless Payment Mean for Business?
The advent of contactless payments has been a boon for businesses. They offer a more convenient way to pay, as well as help speed up transactions.
In addition, contactless payments can help to reduce queues and waiting times, as customers do not need to fiddle with cash or wait for change. This is particularly beneficial for businesses with high customer turnover, such as fast food restaurants or coffee shops.
Finally, contactless payments can also help reduce the risk of theft and robbery, as there is no need to handle large amounts of cash.
The Rise of Recurring Billing
Contactless payment also paved the way for recurring billing to become more commonplace. This is because customers can now provide their card details once and then authorize regular payments without needing to enter their information each time.
This is particularly useful for businesses that offer subscription-based services, such as gyms or streaming platforms.
In short, contactless payments offer several benefits for both businesses and consumers. And with the recent increase in limits, we are likely to see even more widespread adoption of this payment method in the months and years to come.
Why Try ReliaBills?
If you’re running a business and would want to take advantage of the opportunities that contactless payments are bringing to the table, you need to switch to recurring billing. This is where ReliaBills comes in.
ReliaBills is an invoicing and recurring billing platform that helps businesses send invoices and manage their subscription payments. Our set of tools and features lets you create a recurring billing system where you can:
- Save customer information
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- Collect payment automatically
- Manage different subscription plans
- And more!
With ReliaBills, you can take your business to the next level by switching to recurring billing. Visit our website now at www.reliabills.com to learn more about our recurring billing and other services.
As COVID continues to change the way we live and work, contactless payments are likely to play an even more important role in our lives. Businesses that can take advantage of this trend are likely to reap the benefits in terms of increased sales and efficiency. With ReliaBills, switching to recurring billing is easy, convenient, and secure. Visit our website today to learn more about how we can help you get started.