A financial watchdog wants increased security measures to stop fraudsters using contactless payment cards.

The Financial Conduct Authority says customers need to be aware that they have the option of using a non-contactless bank card instead.

There is concern about a gap in security which appears to allow criminals to use tap and go payments even after the cards have been cancelled.

In a letter to the Government's Treasury Select Committee, the chairman of the Financial Conduct Authority John Griffith-Jones says they are working with the financial industry to make contactless cards safer.

"The use of contactless cards is increasing," said Mr Griffith-Jones. "There are 101.8million contactless cards in issue in the UK (69.7m debit cards and 32.lm credit/charge cards) and the average contactless transaction is £8.95p. In 2015, £7.75bn was spent using contactless cards or devices, generating £2.8m of reported fraud losses.

"Whilst this suggests the risk to consumers is relatively low, we agree public confidence could be eroded without further action.

"The key risk to customers occurs from merchants who process payments 'offline' (i.e. retailers who store payments in a batch and process them later - usually overnight in the case of big retailers, but possibly up to a few days later for smaller retailers).

"Around 45 per cent of contactless card transactions occur offline. In most cases merchants choose offline transactions for reasons of cost or convenience for the merchant. In other cases it is either not possible to process payments online (e.g. in-flight aeroplanes) or capped daily charging models make it unfeasible (e.g. Transport for London)."

He said the issues the FCA is exploring with the industry include:

*Removing any onus on customers to identify fraudulent transactions

*Technical enhancements to reduce the likelihood of post-cancellation contactless fraud

*Making the option of having a non-contactless card more visible during card issuing

*Improving customer communications at the time of cancellation

*Providing clarity to customers on the clearing times for contactless payments; and raising awareness of the Industry Hot Card File (automatic check to see if a card has been reported lost, stolen or compromised)

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