Payment News

Implications of Higher Contactless Payment Limits

There are concerns that with the UK’s contactless limit rising to £100, crime is more likely. In addition, the lack of ‘friction’ at the point-of-sale could increase the risk to retailers of unintended losses from consumers who present a card without it registering and then leaving the shop.

The response is that the risks are low and consumers are well protected. The use of wallets on mobile phones is one protection.

Contactless fraud rates are, currently, equivalent to less than 1p in every £100 spent, and a small percentage of overall card fraud.

One view is that it is the responsibility of the consumer to monitor their accounts for unusual activity, to call their bank as soon as a card is missing or if they spot suspicious activity. If they do that, then they should be refunded. Which implies that if they do not, they should not be.

A more systemic approach is to allow, or even require, consumers to set their contactless amount and the value at which point a PIN must be entered. Perhaps allow the consumer to require a PIN to be used if they lose their card or are uncertain about payments being made. The CEO of UK challenger bank Starling, Anne Boden, commented recently: ‘analysing our spending data, we can see that there appears to be little demand for the increased contactless limit and that many would like to retain the same contactless limit or even reduce it.’

Vincent Vinatier, Fintech Strategy Manager at AXA Investment Managers, has suggested that while the pandemic has caused a surge in cashless transactions, ‘there is also an underlying structural change at play. Financial and fiscal regulators are largely supporting the move to cashless payments, as tax evasion and black-market dealings are far more difficult to carry out in a cashless society.’ Sulabh Agarwal, Accenture’s global payments lead, made the point that the limit increase ‘is unlikely to expedite the so-called ‘death of cash’ any further. £100 is at the upper end of what shoppers are likely to spend on their cards day-to-day, so we could see the use of chip and PIN payments plummet as these transactions are replaced with contactless purchases.’

BRC Argues for an End to Interchange Fees

The British Retail Consortium (BRC) wants debit and credit card interchange fees for merchants to be managed better by the government. Its latest annual payment survey shows 80% of retail spending used debit and credit cards, with cash usage down to 15% compared with 20% in 2019, although 30% of individual transactions.

The disruption to global supply chains and rising commodity prices has squeezed merchant margins. The increase in retail spending carried out by cards combined with a 22% increase in debit interchange fees, 7.2p per transaction, means £1.3 billion is paid in card fees, equivalent to £46 per household.

Interchange fees compensate the payment card industry to cover their operating costs and fraud losses. The credit card companies also earn income on interest charged on credit card bills not paid off on time. When payment cards were first introduced, they displaced payments by cheques as well as cash. Fewer cheques meant quicker payment into the bank, no bad cheques and fewer cash deliveries to the bank. Today those fees are seen as a burden that is hard to justify.

The BRC is unhappy that the UK’s Payment Systems Regulator five-year strategy is silent on interchange fees, despite a UK Supreme Court ruling that the fees were unlawful. The BRC’s payments policy advisor, Andrew Cregan argues that ‘Parliament needs to urgently intervene in this anti-competitive behaviour by regulating card scheme fees and abolishing interchange fees, both of which ultimately hurt consumers. Card firms are abusing their dominant market position, and this must come to an end.’

The UK’s Competition Appeal Tribunal has recently allowed a £10 billion class action lawsuit against Mastercard to go ahead.

Originally launched in 2016 and tied up in the courts ever since, the action is over interchange fee charges.

PSP’s QR Ph System

The Bangko Sentral ng Pilipinas (BSP) has now fully rolled out the QR Ph person-to-merchant (P2M) payment facility, working with Philippine Payments Management Inc. QR Ph is now the national standard for QR technology and code scanning for payments.

The aim of PSP is to allow small unbanked vendors to join the digital payments ecosystem. The BSP governor said: ‘because of its low cost and ease of use, QR Ph P2M can enable small unbanked vendors, such as sari-sari store owners and tricycle drivers, to participate in the digital payments ecosystem and allow them to build financial profiles which may eventually facilitate their access to other financial products and services that can help them grow and enhance the resiliency of their businesses’.

Currently there are over 20,000 participating merchants in over 30,000 locations.

With the interoperability feature of QR Ph P2M, consumers and merchants do not need to maintain an account with the same bank or e-money issuer to enjoy its convenience.

Eventually, QR Ph P2M may also be used for bills payment.