Stephanie Watson, Senior Strategist at behavioural planning agency Total Media


Shoppers will soon be able to spend up to £100 with a single tap as the government doubles the current £45 contactless payment cap. Learnings from behavioural science suggest this may well be to the detriment of our bank balances.


The pandemic as a driver of contactless adoption

Contactless payment has been one of the many accelerated trends from the pandemic. Driven by a need to minimise the health risks of handling physical cash, or touching keypad surfaces, consumers have been encouraged to adopt contactless transactions via debit cards, credit cards, smartphones or wearable technology.

This has changed habitual behaviour for many. Those who may have preferred the security of PIN or cash have been forced to switch to contactless. And, when a new behaviour is found to be more optimal, the likelihood of it sticking is increased.

The  Financial Conduct Authority (FCA) has said “it is important payments regulation keep pace with consumer and merchant expectations”, but how will this impact the amount we spend, and how we think about spending?


Frames of reference

Payment limits set anchors in our minds about value. The process of entering a PIN for a transaction over the current £45 limit sets that item as a higher value in our minds, meaning we are essentially anchored to that £45 amount.

In the context of grocery shopping you might think of your basket spend as cheap if you were able to pay with contactless but if you had to enter your PIN you may mentally evaluate it as an expensive shop, even if the difference is only slightly over the limit.

Increasing the limit to £100 therefore is likely to mean that people will infer that spending £100 in one transaction is normal. In turn, this may nudge them to spend more.


Pain of payment

Behavioural economist Dan Ariely has written frequently about “the pain of paying” which suggests that when we pay by cash we experience more psychological “pain”. According to the theory, a part of the brain which is associated with feelings of pain, the insula, is activated when paying for expensive items. And research by MIT found that this region was far less active when paying by card in comparison to cash.

The opportunity to purchase higher value items with less psychological pain means we will likely to do so more often, and have a more pleasant experience in doing so.


Reduction of friction

Similar to the psychological pain of payment, entering a PIN or handing over cash adds friction to our cognitive processing of the payment. Contactless transactions are convenient and require minimal thought. Whereas, the process of physical payment acts as a final touchpoint in reconsidering the purchase. It might encourage you to think “Do I actually need this” and instead act as a “buy it now” type button we see so often online in shortcutting that conscious thought.

A frictionless payment is therefore automatic, meaning we will be less likely to evaluate whether we should buy an item. We’ll feel less guilt over being impulsive at the point of purchase.


Price sensitivity

Research by behavioural marketer Richard Shotton has shown that contactless payments can reduce our sensitivity, or awareness, to price. In his experiment he asked people how much they had spent when exiting a shop. Comparing claimed responses to receipts, he found those who paid by cash overestimated spend by 9% and those who paid by contactless underestimated spend by 5%.

If people are less aware of what they spend when paying by contactless, they will therefore have less control over their finances, and even more so when this is more accessible to broader spending.


Moving forward

The use of contactless through the pandemic has clearly been an important health necessity. Now consumers have had a taste of the benefits and convenience of increased contactless payment, they may well advocate increasing the limits. These behavioural biases however, all highlight the risks to the financial welfare of consumers if contactless limits are increased.

Moving forward, there should be some regulation to ensure the most vulnerable are protected from these implications, and that such a move does not result in consumers incurring debt at a time when financial strain is already being felt by many.



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