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Has the adoption of contactless really spurred the UK to spend more on cards?

Contactless bank cards really started to take off in the UK in 2014, with banks issuing more contactless-enabled cards than ever before and more merchants installing networks that could accept them. 2014 saw transactions totalling £2.32 billion made on the cards, a 255% increase compared to 2013. Step into 2015 and more than £2.6 billion was spent using contactless cards in the first half of the year alone. Couple this already significant increase in volume with the rise of the contactless spending limit to £30 in the second half of the year, and it is clear that 2015 is the year in which contactless has come into its own.


The UK Cards Association recently reported that spending across all payment cards has more than doubled in the last decade, from £270 billion in 2005 to £566 billion in 2014. This increase has been attributed to a better acceptance network, the rise of online shopping and the introduction of contactless cards, but has the adoption of contactless cards really helped drive card spending in the UK?


In 2014, the UK saw electronic payments transactions surpass cash transactions for the first time. However, if we look at the figures above, contactless cards did not make up a significant proportion of this – with £2.32 billion contactless transactions amounting to just 0.4% of the total card transactions. Whilst the figures would make most people automatically jump to the conclusion that contactless cards haven’t helped drive card spending in the UK, it is important to look beyond the figures and more into the effect of contactless on consumer behaviour since its introduction.


Although the spending limit has increased recently, contactless cards are still geared towards low value transactions. Whilst many would argue (and I’m sure, quite rightly) that this fact is down to security concerns and the huge detrimental effect a lost contactless card without a limit could have on an issuer as well as the cardholder, I believe this has had a significant effect on consumer consciousness when it comes to making low value transactions on a payment card. Traditionally consumers tend to make small payments using cash rather than cards, but the introduction of contactless cards with just a £20 limit meant that consumers started to realise that it is acceptable and often more convenient to make smaller, lower value transactions using cards.


Leading on from this is the education consumers have had about contactless cards. TFL went along way by instilling the contactless payment mentality to Londoners with the introduction of the oyster card. By the time contactless cards were readily available most consumers had some semblance of what they are. Whilst this might seem like a tenuous link, I whole-heartedly believe that the introduction of contactless bank cards in the UK, and more recent promotion of them by issuers as well as merchants, has meant that consumers are more aware of the way they are paying for goods and services. No longer do they automatically get cash out when paying for a sandwich at a café, instead they consciously make the decision of which payment method to use. Educating the consumer on new payment methods undoubtedly brings them to the forefront of their mind, and as a result they are more likely to try them out, which in turn could lead to consumers changing their daily behaviours.


Whilst contactless cards have yet to make up a significant proportion of total card payments, they have helped drive card spending in the UK. Hype and discussions around contactless cards have opened consumers up to using payment cards for low value transactions, something that was traditionally frowned upon (to the point where consumers would apologise for making such payments by card). The fact that not all cards in circulation are contactless-enabled, as issuers are waiting for cards to expire before replacing them, also means that there is a large segment of consumers currently unable to use the payment method. Therefore not only do I believe that the introduction and adoption of contactless cards has helped to drive card spending in the UK, I also think that the use of contactless has significant room to grow alongside the acceptance network and issued card base. I won’t be surprised when the percentage of total card spend made up by contactless cards in 2016 is significantly higher than it was in 2014.



Comments: (2)

A Finextra member
A Finextra member 07 January, 2016, 02:14Be the first to give this comment the thumbs up 0 likes


With the limit for contactless sitting at £30, the amout spent will take considerable time to reach the heights of chip and pin transactions. Furthermore, not all banks or issuers have issued contactless cards..hello M&S and John Lewis cards..

What you have to ask is how much of contactless is simply canablisation. Its not that we are spoending more - we are just not using cash at certain locations now - either by choice, or as is the case on TfL because we have no choice.

Yes, Contactless cards will increase in % terms but until the limit is to £50 you won't see a signficant change for a while.


PS - dont forget that the card schemes have issued a mandate to all retailers stating that all terminals must be contactless within the next two years - so once choice is not an option - it's enforcement.


Kirsty Berry
Kirsty Berry - Compass Plus - Nottingham 08 January, 2016, 11:02Be the first to give this comment the thumbs up 0 likes

I completely agree that it will take a considerable amount of time for contactless transactions to reach anywhere near chip and PIN, my point is that the limit on contactless transactions has meant that consumers are now more likely to use cards (whether contactless or chip and PIN) for lower value payments traditionally made using cash, as they understand it is acceptable to do so.


Without doubt, until all cards issued and acceptance terminals are contactless-enabled, the % of contactless transactions will remain small.

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