Friday, January 29, 2021
FCA representatives explained the rationale in "Update on mortgages, consumer credit, banking and payments during coronavirus," an article published on its website in which they also mentioned they will solicit commentary on the proposed move from payments and financial services professionals.
"Since the limit for contactless card payments was raised to £45 last April at the start of the pandemic, people are increasingly making use of contactless payments," FCA regulators wrote. "It’s important that payments regulation keeps pace with consumer and merchant expectations. Recognising changing behaviour in how people pay, as part of a wider consultation, we will shortly be seeking views on amending our rules to allow for a possible increase in the contactless limit to £100."
Luke Massie, chief executive officer at VibePay, observed that the FCA's proposed increase on contactless transactions reflects a broader global movement to a cashless society, which may give rise to new forms of fraud.
"The move from the regulator to potentially increase the contactless limit makes complete sense as we rapidly move towards a cashless society—a trend which has been accelerated by the COVID-19 pandemic," Massie said. "However, by increasing the limit so significantly, consumers will see a rise in 'card not present' fraud, but not to the levels if this move was made during 'normal' times."
Massie also suggested major payment card brands and issuers stand to gain the most from the potential increased spending limits; he also noted that Mastercard recently increased its fees for merchants.
To encourage contactless adoption, the FCA has exempted certain contactless transactions from Strong Customer Authentication (SCA) compliance. The FCA noted that issuers have the option of forgoing SCA for select contactless transactions at the POS if specific conditions are met. Further details and qualifying criteria can be found under Article 11 RTS-SCA.
SCA guidelines are part of Payment Services Directive 2, a set of laws and regulations that pertain to payment services in the European Union (EU) and the European Economic Area. SCA rules stipulate protocols for initiating electronic payment transactions, accessing accounts online and when transacting remotely in situations that increase risk of fraud, unless an exemption applies, according to an FCA article published on its website in February 2012 and updated in March 2020.
In the article, titled "Secure Customer Authentication," FCA representatives stated contactless card transactions clearly benefit merchants and consumers, while urging service providers to mitigate risk by authenticating contactless transactions. "We expect firms to develop SCA solutions that work for all groups of consumers," the FCA wrote. "This means that you may need to provide several different methods of authentication for your customers. This includes methods that do not rely on mobile phones to cater for consumers who will not have or won’t want to use a mobile phone. If this is not the case, or where firms are facing difficulties, we expect them to discuss with us as priority."
Given the impact of COVID-19, the European Banking Authority has given the FCA and other authorities extra time to implement SCA guidelines across all channels. FCA officials confirmed the new deadline for implementing SCA has been extended to Sept. 14, 2021.
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