Expert View

So what does the future mean for contactless?

11 February 2019

Suresite CEO Nick Healy discusses what’s next for contactless payments

Contactless has overtaken both cash and chip and pin as the preferred method of payment in the UK for the first time. There are currently 108.4m contactless cards in circulation in the UK, paying for goods and services to the tune of £3.9billion a month. The use of cash, meanwhile, dropped by £6billion in 2016, and is on course to sink to just 21% of all sales by 2026. And, according to banking trade organisation UK Finance, an estimated 3.4 million people have given up carrying cash altogether.

Whereas once contactless payments were seen as unusual and mainly the preserve of chain coffee shops and cafes, payments are now taken by everyone from taxi drivers to mobile hairdressers thanks to a reduction in transaction fees charged by banks and an increase in the number of reasonably-priced contactless payment solutions. Cards can often now be more cost-effective for retailers than cash, making contactless payments easier for both retailers and consumers.

The use of debit cards in the UK has increased strongly over the last decade, with 96 percent of the population owning at least one. Rather than carrying cash for small purchases in order to avoid ‘minimum spend’ fees, consumers no longer need to ensure their purses and pockets are weighed down with coins.

For retailers, this steep decline in cash purchases brings multiple benefits. Contactless payment transactions are carried out within seconds, decreased amounts of cash in the till mean less time cashing up at the end of the day and there are fewer trips to the bank. Consumers also prefer the speed of contactless transactions over counting out the correct amount, or handing over a note and receiving a handful of heavy coins in change.

The use of contactless payments is set to increase apace. Within the next three years, we should see the £30 ceiling for contactless payments increasing to £50 to reflect the rising price of goods and services. At the same time, consumers and retailers alike have been reassured that contactless payments have not coincided with an increase in fraud levels or accidental payments, despite initial concerns that payments could be triggered simply by walking past a contactless card machine with a card in a bag or pocket.

Perhaps more interestingly, quite a significant change that could be on the cards is that contactless limits will become variable and related to factors including the credit score of the card holder, the amount of funds available in their account and the risk of fraud at a particular merchant.

Another likely change within the next 10 years is that the chips in debit cards will contain a risk algorithm that assesses whether each transaction can be carried out on a contactless basis or if PIN entry will be required.

The use of cards could even be phased out altogether and be replaced by the increasingly sophisticated technology in smartphones and smartwatches. Apple Pay and Google Pay are already widely accepted methods of contactless payments – their use has increased by 114 percent in the last year – and losing bulky purses and wallets crammed with numerous cards will become increasingly attractive, particularly to younger generations who have grown up with the use of such technology.

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