New £100 contactless limit – is it safe?
On 15 October 2021 the contactless payment card spend limit increases from £45 to £100. According to a survey of over 1,000 people I undertook, 51% of people didn’t think it should be raised, whilst 47% thought it should and 2% were undecided.
The main concerns around the rise appeared to be questions about security and the fear of society going cashless.
The fear of going more cashless
It is quite clear that banks need to do more to alleviate consumers concerns. Many are rightly worried about fraud and don’t know that they will be able to get their money back or how to do it or worry it will take too long. Banks such as Starling and RBS already notify their customers by text every time their contactless card is used and other banks should follow suit. I heard from many people who also wanted to be able to set their own contactless payment limit.
The fear of the elderly about becoming a more cashless society
Denni Smith, who runs the Vintage 62 salon in South Croydon, says that her elderly salon clients are very concerned about the move towards contactless payments. “They fear that if their card was stolen, it’s very easy to lose money very quickly and not being very tech-savvy even more upsetting to then go through the online grief of getting it refunded. They have only just got used to contactless although many prefer to still ‘insert’ their card as it makes them feel safer.” Many elderly people still use cash too and worry that this move will soon mean there will no longer be payments in cash.
The fear for people going into debt due to using less cash
There is also a concern about people being more likely to go into debt. Sara Williams, who writes the debt advice blog Debt Camel, believes contactless payments make it harder to budget, as it feels less like real money. “Especially if you are with kids or a friend, it’s so easy to tap while chatting – did you even register what the total was?”, she questions.
The fear for children’s learning as we move towards a more cashless society
Sarah Laker is concerned about how children will learn about money if we go cashless. “I don’t have a problem with the contactless limit being increased, however I do wonder how children are learning the value of money? I might be old fashioned here, as my kids are grown up! But ‘back in the day’ I gave them pocket money in their hand so that they had to me work out how to spend it, and when it was gone, it was gone!”
Doing more to keep money safe
Consumers also told me that they felt banks should do more to get people to use Apple Pay or Google Pay, as devices have to be unlocked to use them, adding another level of security.
Paul Newton, MentalTheft cyber security expert, says that he likes that the upper limit is being increased but comments “I think it’s still safer if you connect it to your phone and force it to use biometrics to secure it. Connecting the credit card to my phone my thumb print is needed to authorise a payment. A stolen contactless card can be used anywhere without authorisation.”
Card cloning myths
“A contactless card must be used in a specific way to work. That means it can only be a few centimetres away from the card reader and not near any metal objects, like keys and mobile phones, or indeed any other contactless card.
You must be extremely close to someone for them to be able to read your card”, says UK Finance, which is the collective voice for the banking and finance industry.
“Even then, they would only get the card number and expiry date which is the same information you see by simply looking at the front of any card. There’s no way anyone can access to the important details such as the security code on the back of the card. As the vast majority of online retailers require additional details like these to make a purchase, there is very little chance of a fraudster being able to make online transactions.”
UK Finance continues “It’s not possible to simply ‘steal’ cash from a contactless card. All money must go through the card system.” A person receiving a payment must have a retail “merchant” account to obtain any money from a card.
According to UK Finance “There are thorough security checks before these can be set up and new accounts are continuously monitored for any suspicious activity. Every card payment is fully traceable, right through to the recipient account, if any fraudulent activity was reported the recipient could be easily identifiable and the money would be taken back.”
So when are cards used fraudulently?
John Bores, owner of security consultancy firm Bores, doesn’t agree with UK Finance. He believes that fraud is likely if the card is stolen. He says that “The vast majority of fraud using contactless is down to opportunistic or in-person theft of the card, and the impact is limited by the limits per transaction. The technology itself is largely secure since anyone unethical with the ability to exploit the flaws that exist has easier ways to carry out crime.”
Did fraud rise when the card limit was raised to £45 in April 2020?
UK Finance says in its report Fraud – The Facts 2021: “Losses due to lost and stolen fraud dropped by 17 per cent in 2020, falling to £78.9 million, compared to £94.8 million in 2019. The number of incidents also decreased sharply, falling by 30 per cent over the same period. The majority of this type of fraud occurs using cards obtained through low-tech methods such as distraction thefts and entrapment devices at ATMs.
2020 saw the first annual decrease in contactless losses since we began collecting data. The fall in contactless card fraud was in part due to the reduced opportunities for fraudsters to commit these types of scams because of lockdown restrictions during the pandemic.”
But there was a lockdown effect. “Raising the limit does bring in a risk to consumers of increased fraud, and despite claims that a previous increase reduced the amount of fraud, this happened at the beginning of a lockdown when opportunistic theft became much, much harder”, says Bores.
What are your rights with card fraud?
Customers are fully protected against unauthorised card fraud, so you will get all of your money back and will never be left out of pocket. Every card has an in-built security check which means from time-to-time you have to enter your PIN to verify that you are the genuine cardholder.
However, if you lose your card or think it might have been stolen, then you should contact your bank straight away. If you notice any suspicious activity on your account, contact your bank immediately.
UK Finance says “The Payment Services Regulations 2017 outline what consumers can expect their bank to do if there have been unauthorised transactions. Banks abide by the existing laws, which clearly set out the requirements regarding refunds for unauthorised payments”
Unless customers have been grossly negligent or deliberately failed to comply with their obligations then banks are legally obliged to refund money fraudulently taken and this should be within 24 hours. This is covered by the Payment Services Regulations 2017 (PSRs)
What is expected of customers and are there limitations?
Customers make an important contribution to the effectiveness of bank security and counter-fraud systems. Their obligations under the PSRs means they must use payment methods in accordance with their terms and conditions. This means they must notify, their provider promptly if cards are lost or misused. They must also keep the personalised security features safe.
If you fail to take reasonable steps to protect your card (e.g. gave away your PIN) the bank can deduct up to £50 from the refund to you. However if the debit card was used to shop off premises (e.g. online) then a contract has been formed under the Consumer Contracts Regulations and your bank will have to refund you.
If you acted fraudulently and the bank can demonstrate this, it can refuse you the whole refund. But it cannot deduct anything after you have informed the bank about the debit card being lost or stolen.
If someone else uses your debit card (for instance details lost in a data breach or the card is cloned) then you should be refunded. But you must report any issue promptly.
If you incur other charges then the bank must refund these and make sure you are back in the position before the loss.
It is slightly different for credit cards. Under The Consumer Credit Act the most you should be responsible for is the first £50 of any unauthorised transactions made before you reported the card missing.
What should banks do?
Financial institutions need to do more to educate consumers about the security of cards and what to do when cards are stolen. They also need to follow the lead of other banks which have already set up systems to alert customers when their card is used. Consumers should also be allowed to set their own limit for contactless transactions.
An abridged version of this article appeared on the Good Housekeeping website on 14/10/21
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