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100£ contactless limit, genius or madness?

The UK has just increased its contactless transaction limit to £100 (€118, CHF126). It’s the highest in Europe and one of the largest limits in the world, exceeded only by some countries in Asia. The press is going to talk a lot about the opportunities for fraud from stolen cards, and for once, they might be right. The temptation for petty criminals to be able steal a card and perform a few transactions each up to £100 may be too high for some. To counteract this and put users in control, some of the more innovative banks are allowing their customers to set their own personal limit in their banking app.

The UK and offline PIN

But fraud is not what I want to talk about. The UK is one of a small number of countries that uses a mechanism called offline PIN. In offline PIN markets, PINs entered into POS terminals are sent to the card for validation and not the host. Offline PIN is great for being able to perform fast offline transactions and seemed like a sensible solution when it was first introduced. For contactless payments however, offline PIN is terribly unhelpful. Most countries around the world use online PIN where you can simply tap your contactless card on a reader, and if it’s over the contactless limit, you enter a PIN into the PIN Pad. The card data and PIN are sent to the bank host where the transaction and PIN is checked and approved/declined as usual. That doesn’t work in offline PIN markets, as the bank host can’t validate the PIN. So, if you attempt to perform a contactless transaction over the limit, you will be asked to perform the transaction again by inserting the card into the contact card reader and type the PIN into the PIN pad; it’s a not a great user experience.

Offline PIN and SoftPos

And now the important stuff, if you think about SoftPos, there is no contact card reader to insert the card into as SoftPos is contactless only. So, in offline PIN markets, if you wish to perform a contactless transaction with a card over the contactless limit you are out of luck. So, this is where the high £100 limit helps, it removes the need for a PIN entry for the vast majority of transactions. Most card transactions are well under the £100 limit, so it enables SoftPos to become a real viable payment acceptance device, not just for low transaction value retailers. What’s worth mentioning is that the limit doesn’t apply if you are paying with a wallet such as Apple Pay or Google Pay instead of a card, as in that case the PIN is replaced by cardholder verification using the biometric sensor.

Will the £100 limit give UK based SoftPos a boost?

SoftPos solutions have been throttled by this issue here in the UK, this should give them the chance they need. Only time will tell whether this change is a good idea from a fraud and usage perspective, but at least it gives the opportunity for SoftPos to thrive in the UK.


Paul Butterworth

Paul heads up Abrantix in the UK. He has over 30 years experience working in the card payments and digital security industries. He has a particular interest and focus on the convergence between payments and mobile devices.

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