The UK government is raising the limit on contactless transactions from £45 ($57) to £100 ($128), the amount requested by finance industry leaders earlier this year, the Financial Times reports. The limit was first increased from £30 ($38) to £45 at the onset of the coronavirus pandemic in March 2020 in an effort to curb potential virus transmission via cash usage. The payment method was already popular in the UK prior to the pandemic and saw a 44% year-over-year increase in November, according to the most recent data available UK Finance data, as cited by the FT.
A higher limit could have implications on UK banks’ already falling ATM penetration, which is contingent on cash usage trends. Rising card usage and maturing digital banking platforms have reduced dependency on ATMs among many UK consumers. And by broadening the scope of transactions that can be conducted via contactless payments, consumers will have even less of a reason to withdraw cash. That will likely feed into the existing trend of declining ATM penetration: Insider Intelligence expects ATM penetration (defined as the percentage of UK bank account holders ages 18+ who access ATMs at least once per year) to drop from 84.7% in 2019 to as low as 74.2% in 2024. But critics warned that the contactless limit increase would trigger a negative domino effect for cash-reliant customers, should banks shrink their ATM networks in response. Given pushback over ATM closures, banks will need to maintain their ATM networks and instead adapt their strategies to drive higher value from transactions.