As part of the design phase for a digital pound, the Bank of England (the Bank) is conducting experiments and proofs of concept (PoC) in collaboration with private-sector innovators and a range of stakeholders.
These aim to assess the technical feasibility and technology and policy implications of potential digital pound design features.
No decision has been taken on whether or not to build a digital pound.
The purpose of this experiment was to assess the technical feasibility of using existing point-of-sale (POS) hardware, as currently used in the UK, to initiate digital pound payments.
This involved a PoC that used EMV[1] standards to send payment instructions from smart cards to POS devices, and then to an application programming interface (the ‘BoE API’).
While the Bank did not build a digital pound infrastructure, and no real money payments were made, the experiment demonstrated the following from a technology perspective:
Existing POS terminals in the UK could, in principle, be used to initiate digital pound payments.
Those terminals do not appear to require modification in order to make digital pound payments.
The experiment also concluded that it is technically feasible to implement offline payments functionality at points of sale using existing POS terminals.
But this functionality might require that an offline payments application be deployed to those terminals in order to store offline balances.
Therefore, while existing POS terminals may not need to be modified to make online digital pound payments, they might need to be modified for offline payments.
There are several other factors, such as operational, legal and commercial considerations, that will impact design choices around digital pound payments at points of sale.
Those factors were not tested in this experiment.
Project overview
Consult Hyperion[2] developed this PoC to help us test digital pound payment initiation using existing POS hardware. We (the Bank and Consult Hyperion) used the following components to simulate in-store digital pound payments:
POS devices, namely traditional POS terminals, mobile POS terminals, and a software POS application on an Android mobile phone;
EMV-compliant contactless kernels;[3]
Smart cards[4] with EMV applications[5] and different verification methods, namely Consumer Device Cardholder Verification Method (CDCVM)[6] and Online PIN;
A proxy server developed by Consult Hyperion, referred to as the BoE API; and
A web application dashboard showing balances, transactions and error logs.
Background
In February 2023, the Bank published a Technology Working Paper, which accompanied the Bank and HM Treasury’s joint Consultation Paper on the digital pound.
The Bank and HM Treasury confirmed in January 2024 that further preparatory work was justified to enable us to respond to developments in the payments landscape and to reduce materially the lead time if there is a future decision to introduce a digital pound.
The Bank and HM Treasury have therefore moved from the research and exploration phase of work on a digital pound to the design phase, which will result in a decision around the middle of the decade on whether to build a digital pound.
EMV (Europay, Mastercard and Visa) is a set of technical specifications which enable card-based payments to be consistently accepted across different payment schemes.
Consult HyperionOpens in a new window was awarded a contract for point of sale consultancy services.Opens in a new window
EMV kernels are the software applications that implement the EMV functionality, enabling payment processing.
These smart cards were fingerprint-enabled, allowing us to test strong customer authentication without requiring users to authenticate to a smartphone. The user’s fingerprint remained on their card and was not shared with other parties. See Payment Services Regulations 2017Opens in a new window for information on strong customer authentication requirements.
We developed applications based on EMV standards that could interact with the EMV kernels on the POS devices.
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