UK FCA updates guidance in Payment Services and Electronic Money Approach Document on contactless limits

The UK Financial Conduct Authority (FCA) has published a revised version of its Payment Services and Electronic Money Approach Document, updating its guidance on exemptions from strong customer authentication (SCA), including the contactless payments exemption. Among other things, Chapter 20 of the Approach Document now states that:

• Payment service providers (PSPs) are allowed not to apply SCA at the point of sale where the payer initiates a contactless electronic payment transaction that has been reasonably identified by the payer's PSP as low risk. This exemption is subject to compliance with Article 2 of the SCA regulatory technical standards (SCA-RTS).
• In addition to the factors outlined in Article 2(2) of the SCA-RTS, the PSP may consider additional risk-based factors to help it identify whether a transaction is low risk, such as the payer's normal spending or behavioural pattern or their location.
• The PSP may also reasonably identify a transaction as low risk based on the value of the individual contactless electronic payment transaction, the cumulative value of previous contactless electronic payment transactions and/or the number of consecutive contactless electronic payment transactions since SCA was last applied. Whilst not required to do so, PSPs may place limits on the use of contactless payments to reflect these factors.
• PSPs should consider their overall fraud rate for in-person contactless payments, as a significant increase in these fraud rates could indicate it is processing payments that fall outside the exemption.
• PSPs that choose to rely on the contactless payments exemption should ensure they are complying with their obligations under the consumer duty, including when making changes to their contactless limits. PSPs should consider enabling customers to set individual personal contactless payment limits and communicate effectively to customers when this option is available to them. Any change in individual personal limits will still need to be within a level the PSP identifies to be of a low risk.
• If a PSP makes any changes to how it applies the exemption, such as any changes to its contactless limits, it must consider its obligations under the consumer duty when doing so. It should take reasonable steps to ensure their customers understand how those changes could impact them. It should also monitor outcomes that customers are receiving, in line with the consumer duty, and consider impacts on different groups of customers, including those with protected characteristics or characteristics of vulnerability.

The FCA has published this updated guidance to reflect changes to contactless payment limits that also came into force on 19 March. The Technical Standards (Strong Customer Authentication and Common and Secure Methods of Communication) (Amendment) Instrument 2025 remove regulatory contactless limits and introduce a new risk-based exemption to give PSPs and banks greater flexibility to set their own limit for contactless payments.

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