Japan-based payment firm JCB and identity firm IDEMIA are moving ahead with stage two of their central bank digital currency (CBDC) pilot following the successes of previous studies.
The new phase of the JCBDC project will focus on offline payment functionality for CBDCs in partnership with global fintech firm Soft Space. In their official disclosure, the trio said they will collaborate on a CBDC solution to support payments without long and short-term internet connectivity.
Already, the firms are considering several strategies to achieve offline payment functionality, focusing on a reliance on near-field communication (NFC). The statement says CBDC users can easily tap devices to make peer-to-peer (P2P) connections without an internet connection using NFC-enabled devices.
Alternatively, the second stage of experiments may explore the use of a stored-value card (SVC) designed to hold CBDC funds. The SVC, operating as a prepaid debit card, will still require tapping with an NFC-enabled device to make offline transactions, “acting as a digital version of cash.”
The trio revealed that the second round of experiments will begin in early 2024 but failed to give a timeline for completion. IDEMIA and Soft Space have been saddled with providing the mobile wallet application, tokenization back-end server, APIs, and SDKs to begin the pilot.
Both parties have garnered previous offline CBDC experience, with Soft Space carving a niche for itself in contactless payments and IDEMIA’s blueprint achieving the status of the offline CBDC industry standard.
“We are convinced that allowing the public to transfer funds offline either with their contactless card or with their mobile phone will give them a great flexibility of choice,” said Romain Zanolo, IDEMIA Managing Director for Payment Services.
“With this new phase, we continue to build on the expertise gained from previous successes with central banks across the world,” added Zanolo.
In the first round of experiments, IDEMIA and JCB introduced a CBDC payment solution to allow merchants to accept CBDCs without modifying existing point of sale (PoS) terminals.
Soaring interest in offline CBDCs
To guarantee decent CBDC adoption rates, central banks are throwing their weight behind offline payments. Central banks in India, Canada, China, and South Korea are tinkering with the concept. Still, the need for global technical standards continues to plague developments.
As a way around the absence of a global framework, the Bank for International Settlements (BIS) proposed its solution for central banks keen on experimenting with offline CBDC functionality. A key feature of its proposal revolved around mitigating security risk, promoting financial inclusion, and protecting consumer privacy.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Finding ways to use CBDC outside of digital currencies
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