A major consultation has been launched which could see drivers able to pay for cars using contactless payment for the first time across the UK.
It comes after the Financial Conduct Authority (FCA) launched a new consultation into removing the £100 limit on contactless payments.
The consultation, which will run until May 9, seeks views on whether the rules, limiting contactless card transactions, should be amended.
One option would be to increase the current £100 limit in place on cars with another option looking to remove the cap altogether, with a view to benefiting households, businesses and economic growth.
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The FCA is looking to remove the £100 limit on contactless payments
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David Geale, executive director of payments and digital assets at the FCA, said: “Currently 85 per cent of people in the UK make contactless card payments each month. This is the perfect opportunity to explore whether we can improve and increase trust in the UK’s payments system.
“We’ve worked fast to progress this work which is one of around 50 measures we put forward at the start of the year to help support economic growth across the UK and, in turn, improve lives.”
If the changes go ahead, it will see drivers able to purchase cars potentially worth hundreds of thousands of pounds with just the tap of a card.
The move would also remove the need for car financing schemes which have gained a lot of criticism in the past year.
An investigation found a rise in discretionary commission agreements which resulted in drivers overpaying thousands in interest between 2007 and 2021.
The FCA has been working alongside the Supreme Court to come up with a new compensation scheme for the scandal which is set to cost the industry billions.
Martin Lewis, the money savings expert shared: “The regulator will continue with discretionary commission arrangement cases, those 40 per cent of cases, those are the ones where they pumped the interest rate up.
“In that case, the payout’s likely to be in the single-digit billions or maybe getting up to £10billion. I think that’s the most likely outcome. That’s the total payout.”
Emma Reynolds, economic secretary to the Treasury, added that the FCA’s review of the contactless payment limits, including removing the £100 limit on individual payments, is a “welcome step to ensure that families can safely benefit from more flexibility when making purchases.”
The FCA said existing legislation requiring firms to reimburse consumers in cases of unauthorised payment fraud, for example when their cards are lost or stolen, would remain in place.
Meanwhile, Jana Mackintosh, managing director, of payments and innovation at UK Finance said: “We welcome today’s announcement from the FCA seeking views on how we can improve payments.
“Having a contactless limit is important in terms of fraud prevention, but we believe overall limits and the number of times a customer needs to enter a pin should be determined by industry rather than the regulator. Banks know their customers and can strike the right balance between protecting them and giving them fast and secure payment options.”
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The FCA will run its consultation until May 9, 2025
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To help mitigate any potential fraud that arises from the changes to contactless limits, the FCA added that listing legislation “requiring firms to reimburse consumers in cases of unauthorised payment fraud, for example when their cards are lost or stolen, will remain in place”.
