Maintaining digital payments in an offline world

When you’re having a really bad day, sometimes that isn’t an option if you are without cash and payments networks are down. But an ANZ project shows it may be possible in the future.

“As reliance on digital payments continues to grow, it’s critical this access is simple and available in both online and offline environments – particularly if an incident makes regular payment networks inaccessible.”

In an increasingly digitised economy, access to cash remains important in all communities across Australia. As reliance on digital payments continues to grow, it’s critical this access is simple and available in both online and offline environments – particularly if an incident makes regular payment networks inaccessible.

This could be as simple as a power line damaged in a storm, shutting off remote communities, or more serious, such as a natural disaster separating people who don’t necessarily use cash.

The need for a Plan B becomes evident when you look at the statistics. Cards have surpassed cash with 75 per cent of payments occurring with cards compared with 26 per cent in 2007, according to the Australian Banking Association. And the value of mobile wallet transactions soared to $93 billion last year from just $746 million in 2018.  

But what happens to those payments if the regular networks are offline? At ANZ, we’ve been exploring if - and how - a digital form of cash could work in this kind of offline, disconnected environment. When people are vulnerable and access to necessities like fresh food or warm clothing could make a big difference.

So, we built the infrastructure and tested it. And at the end of May, the first sale was made.

It was a cup of coffee.

Systems offline

The project was part of ANZ’s participation in a central bank digital currency (CBDC) pilot run by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre. The coffee purchase was made as part of our offline-payments use case which seeks to test if a CBDC can be used to buy everyday goods and services when online connectivity is unavailable.

We’re hoping to find out if CBDC could be easily accessed by individuals and used in a simple 'cash-like' manner, even offline.

We’ve brought together organisations from across the financial services and tech industries to test how this could work. The project team includes Capgemini AUS & NZ, Thales Australia, Secretarium and ANZ Worldline Payments Solutions*, with support from Southern Cross University and RMIT University.

The aim is to demonstrate how an organisation, such as a university, could step in during an emergency to provide immediate financial support through the distribution of CBDC.

Our offline payments solution allows people to receive funds even when they don’t have access to traditional banking services, are unbanked or are in emergency situations.

For example, during the floods in February and March last year the New South Wales Northern Rivers region was without power for several days. Southern Cross University said this meant some bank ATMs and vendors’ EFTPOS solutions were unusable.

The pilot program allowed collaboration between the banking industry, the university’s on-campus suppliers and the professional and research arms of the institution.

RMIT agrees with the proposition. They believe the potential for the innovation of offline payments to provide financial support to people in need will be ground-breaking.

The solution built for this pilot uses confidential computing technology to respect the privacy of individuals while remaining compliant with regulatory requirements, including anti-money laundering rules.

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Secure network

At the end of May, RMIT and Southern Cross University students successfully purchased coffees on campus using CBDC.

The pilot involved several steps. First, the universities operated a secure smartphone app to view their CBDC balance. Using the same kind of NFC-tapping functionality that makes things like contactless payments work, CBDC was loaded on to smart cards. 

Second, the smart cards were given to participating students to make purchases at on-campus merchants such as cafes, gyms and book shops.

Third, merchants were given a secure smartphone app to accept the students’ card payments at point of sale, where CBDC payments could be transferred in an offline scenario. These consumer-to-merchant payments functioned as cash sales. Multiple offline transactions can occur to evaluate consecutive offline payments in the proposed solution.

Finally, merchants used their app to view the CBDC they received and could select to redeem their CBDC balance into fiat currency – dollars and cents - which could then be transferred to their bank accounts.

The pilot seeks to address the need for CBDC to be easily accessible and financially inclusive - replicating the convenience of physical cash while retaining broader technological and operational efficiencies.

At ANZ, we are continuously innovating and collaborating across industries to enable customers to unlock new opportunities, expand their reach and drive growth in an increasingly digital and interconnected world.

We are still testing and learning as part of this pilot and are seeing some interesting results and we look forward to sharing more about what we’ve learned.

Cindy He is Manager, Industry & Innovation at ANZ Institutional

*ANZ Worldline Payment Solutions means Worldline Australia Pty Ltd ACN 645 073 034 (“Worldline”), a provider of merchant solutions. Worldline is not an authorised deposit taking institution (ADI) and entry into any agreement with Worldline is neither a deposit nor liability of Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) or any of its related bodies corporate (together “ANZ Group”). Neither ANZ nor any other member of the ANZ Group stands behind or guarantees Worldline.