When contactless card payments were first introduced, there was a general fear among the public that a thief could steal your card and go on a wild spending spree.
Naturally, that turned out to not be the case, with strict spending limits put in place to prevent such things.
As time progressed and people’s spending habits changed (along with the world around them), the need came to increase contactless spending limits to keep up with the times.
This has happened numerous times in every part of the world that uses contactless payments – but what, if any, have been the effects?
Has increasing contactless payment limits changed the way we spend and interact with money as a whole?
Let’s take a look…
When did contactless payment limits begin to rise?
In the UK, it was back in 2007 that contactless payments were introduced, albeit on a very limited basis to test the waters, starting with a pay limit of £10, according to ThamesTechnology.
It wouldn’t be until 2 years later in 2010 that this limit was upped to £15, though contactless spending was still far from the norm.
It would be another 2 years until the payment was increased again, to £20 per transaction, and it was around this time that contactless payments began to take off in the UK with transactions totalling £1 billion in 2013.
In 2015, the limit was raised yet again to £30, but it wouldn’t be until the start of the pandemic that the limit would jump again – to £45 – out of necessity.
In late 2021, the limit hit £100 per transaction, where it remains as of the time of writing. However, there are currently early rumblings that it may increase even further.
What the numbers tell us about the effects of contactless payment limits
Given we’ve had over 15 years to examine customers’ spending habits in-between contactless limit rises, certain stats help us understand why customers spend the way they do in the light of these rises.
People are willing to spend more if the option is on the table
It sounds like a foregone conclusion, but the numbers do indeed support the notion that people are happy to spend more if the option to spend more per transaction is presented to them.
In the months following the rise of the contactless limit from £45 to £100 in the UK, the average spend per transaction across the population rose by 30%, according to data from UK Finance. However, it wasn’t in the way you might expect…
The rise in contactless payments doesn’t encourage people to spend in excess
The same data from UK Finance shows us that the average contactless spend rose from £11.86 in September 2021 to £15.30 by December 2021.
Had the jump been a seismic one, where many people began spending towards the £100 limit regularly, it would be safe to assume people as a whole enjoy taking advantage of the opportunity to spend in such large numbers so freely.
But these numbers, which are not excessive and are very gradual, are more indicative of a movement towards the recognition of spending in higher numbers, as opposed to people diving off the deep end.
This implies the rise in contactless limits encourages more of an acceptance of higher contactless payments within the population, rather than a sudden urge to spend wildly.
This is encouraging from a business perspective, as it suggests a shift in the general attitude towards contactless spending. In other words, if you accept contactless payments, there’s a chance more and more people will be willing to spend in higher numbers with you, than was the case a couple of years ago.
Contactless limits don’t need to rise for people to embrace spending contactlessly
Given the above, it would be easy to assume rising the contactless limit is the major factor that affects the willingness of people to spend in higher amounts more frequently. However, the data shows that something else must be going on.
Contactless payments in the UK continue to rise year on year, without any increases in the spending limit. There were 1.5 billion contactless card transactions in March 2023, 7.5% more than the 1.4 billion in March 2022, according to more data from UK Finance, with this number predicted to continue along the same trend as we head into the future.
These numbers are also in contrast with the number of general debit and credit card payments (including both contactless and chip and pin). There were 2.1 billion debit and credit card transactions in the UK in March 2023, 4.3% more than in March 2022
This suggests that not only are people more willing to spend more contactlessly without being influenced by rises in the spending limit, but they’re also willing to spend more in general.
Having said that, this could be a result of numerous factors not associated with contactless technology at all, like the cost of living and inflation.
Due to rising prices and people being forced to spend more on their daily shopping, it’s possible that the leaps in contactless spending we’re seeing are, in part, a result of needing to spend more instead of wanting to spend more. In turn, this results in people spending more on credit cards, rather than using their own cash.
Around 1 in 4 adults in the UK are using their credit cards more or borrowing more on average than they were two short years ago, according to the Office for National Statistics.
We’ll understand more about this when (if) the economy stabilises once again. Until then, all we can do is monitor people’s spending habits as we dip in and out of financial uncertainty and see if we can spot any differences between the two.
Is your business taking advantage of the contactless boom?
In 2021, over two-thirds of businesses accepted some form of contactless payments, according to customer analysis experts Raydiant. This number will have undoubtedly risen further since then, but there will still be a lot of businesses that are yet to take advantage of contactless payments and the advantages they bring.
If your business is yet to get on board with contactless, you could be missing out on the custom of the millions who use it as their preferred payment method. Add to this the fact that physical stores can experience a surge in custom thanks to the speed and efficiency of contactless payments, your overall customer numbers could be suffering, too.
Choose a reliable and reputable contactless card machine provider to help you join the world of contactless card payments and you will likely see a staggering change in your business for the better.