The UK is finally keeping up on contactless payments. Despite London being a world capital for financial technology, Britain has lagged other nations when it comes to some key elements of frictionless consumer finance.
Even the increased limit of £45 for a single contactless payment, which was introduced in April 2020 after the pandemic hit, was low in relative terms. Now, thanks to an intervention from the Chancellor Rishi Sunak, the threshold has been increased to £100
and £300 for multiple payments.
Understandably, some people and organisations have raised concerns about fraud. But many of the systems and cards in use offer safe and secure purchases, the Financial Conduct Authority has taken these risks into account and many digital or neo-banks enable
consumers to immediately freeze their cards if they are lost or stolen.
On the face of it, the move seems minor, but it could actually be a game changing one, especially for the hospitality industry, a sector which has been hammered during the pandemic and will need all the help it can get as the UK begins to open up from 12
To begin with we must realise that Britain became a majority-card based society for the first time ever last year. The pandemic clearly accelerated this adoption, but there’s little, if any, evidence that this trend will go the other way. Lobby group UK
Finance said at the time that 51% or £20.4bn worth of all payments were used with either credit or debit cards last year.
Cash, meanwhile, is an increasingly niche method, falling to 15% of all payments over the same period. This isn’t surprising given that retailers and the hospitality sector were encouraged during the pandemic to promote contactless. As of November 2020,
there are more than 156m credit and debit cards in issue with UK residents, more than 135m of which have contactless functionality.
The scene set, let us get into the nitty gritty of the payments journey. The speed or velocity of payments is bottlenecked by chip and pin. Despite the fact that the process is unhygienic and sometimes awkward, it can also have a dramatic impact on businesses.
How? Well, consider restaurant owners. You are effectively trying to make as many sales (or ‘covers’ as they are known within the hospitality industry) as you can per day, whilst keeping your customers happy. When turning over a table of four, for example,
the bulk of the time leaving the restaurant (12 minutes on average) is spent on clearing tables. However, the overall time could be significantly reduced by cutting out the clumsy chip and pin process.
Taken alone, that figure seems worrying. However, when you scale it up and consider the fact that most restaurants do not want to keep people longer than say two hours or less, the payment time can be the difference between having four to five additional
covers per evening (based on a small outlet) and ultimately making payroll and paying the bills.
The £100 limit dramatically increases the velocity of payments, allowing customers to more efficiently leave the venue, combatting queues and other slack in the restaurant system. The benefits here for the food and beverages industry here is clear. It will
also have positive impacts on other areas of retail. The weekly shop will be quicker, as will filling up the car as you go on post-lockdown journeys. That is why I consider the contactless limit increase to be a win-win for consumers and businesses, and that
is why it is time for the UK to start tapping away.