A series of strange “accidents” around telecommunications cables on the bottom of the Baltic Sea are one of the circumstances that have prompted the 5 most cashless countries in Europe to reflect. The answer is supposed to be payment systems that can operate without a connection to the network.
“How will we pay after the tsunami?” – this question illustrates one of the problems related to the dominance of cashless payments. Physical cash does not need electricity or communication to effectively function as a medium of exchange. Payment cards, central bank digital money (CBDC), and unofficial cryptocurrencies are always dependent on infrastructure to a greater or lesser extent.
The issue of the payment system's resistance to disruptions must be tackled first by countries where cash has become less important. It so happens that in Europe this group includes countries that are connected by geographical location and… dependence on undersea cables that supply energy and the internet.
As reported by Reuters, Finland, Sweden, Norway, Denmark and Estonia are starting to work on payment systems that are supposed to cope with the lack of connectivity . The Swedish National Bank has even set a deadline. From July 1, 2026, card settlements are to be carried out in such a way that transactions can be completed efficiently even when the network access is interrupted for up to seven days .
The technical details of the planned solutions are not yet known, but it is known that they will be based on payment cards. Let us recall that the first modern cards (debuting in the 1950s) were largely based on the circulation of paper documents. It was not until several decades later that electronic data exchange systems supporting authorization, settlements and finally settlement became widespread.
We asked eminent industry experts to explain how a payment card can cope without connectivity today.
“But you can pay with a card on the plane”
– In the absence of a telecommunications connection, some payment terminals may operate in the so-called offline mode , i.e. they can still accept a transaction, but this requires meeting certain technical and organizational conditions, both on the part of the merchant and the card issuer – indicates Adam Tencza, member of the PayTel management board.
– From the point of view of the merchant (e.g. an airline), this may mean a risk related to the lack of authorization of the transaction by the card-issuing bank ( the “store and forward” model, authorization occurs after the connection is restored ). There is also an offline transaction model , based on the card settings saved on the EMV chip (usually applies to credit cards). In such a case, authorization takes place offline without any risk for the merchant. If in the meantime there are no funds in the customer’s account, the merchant bears the risk of non-payment – emphasizes Adam Tencza.
– Banks set individual limits for offline transactions. These are, for example, the amount of a single transaction (usually PLN 50-200) and the total number or sum of transactions (e.g. max. 5 transactions or PLN 500). The limits are often lower than for standard contactless payments (e.g. PLN 100 offline vs. PLN 200 for online contactless). The transaction may be declined after the fact if the bank does not confirm the funds or the card was blocked. Some banks require a PIN, others skip it for low amounts (e.g. airlines), but the bank's setting is paramount. For the seller, there is a risk of losing the payment in this scenario – if the bank declines the transaction after synchronization, the seller will not receive the money. That is why many companies limit offline payments or apply additional security measures – explains Janusz Diemko, consultant, expert in the payment and fintech market.
– Settlement takes place with a delay – only after the connection is established does the terminal send the outstanding transactions of the settlement agent and then for settlement by payment organizations. In practice, this may mean that funds are posted to the customer's account even after a dozen or so hours or days – indicates Adam Tencza for further steps.
– If verification fails or there are insufficient funds in the account, the transaction will not be settled and the funds for the sale will not be transferred by the settlement agent – adds Janusz Diemko.
How could an offline system work? Experts suggest
Janusz Diemko, consultant, expert in the payment and fintech market
The answer to the question depends on whether we want to build a system that is resilient to local problems and shorter disruption times or one that will survive a pan-European attack on communications over a longer period of time.
The first, in my opinion, does not require changes to the current system, which can operate offline, say, for a day. Temporarily, the simplest step would be to change transaction limits (quantitative and amount), but the side effect is high risks of fraud and unsettled transactions.
A long-term approach would require greater investment by merchants, as well as changes in consumer behavior and habits. Available options include a prepaid card/e-money . The user blocks a certain amount on the account (e.g. PLN 500) and the funds are physically saved on the card/chip (like in an electronic wallet), after the connection is restored, the transactions are settled and the surplus is returned to the account.
Prepaid p2p transactions may be easiest to implement, using local communication (Wifi, NFC, bluetooth) to transfer value. In this scenario, transaction tokenization and very strong cryptography would be required.
Another option is a central bank digital currency – CBDC. These systems do not currently operate offline, but theoretically they could. However, if transactions are to take place offline, the anonymity of transactions must be minimized. This is required for security and blocking double spending.
Regardless of the development of technology, cash should remain an important element of the payment system as the final safeguard in the event of serious failures . Therefore, it is so important to maintain the appropriate availability of physical money even in the era of increasing digitalization.
In the short term, it seems most reasonable to improve existing offline solutions by increasing limits and improving synchronization mechanisms. In the medium term, it is worth developing the concept of offline wallets, while in the longer term, the most promising seems to be a hybrid concept, combining CBDC with offline technologies and traditional cash. The costs of implementing such solutions would be significant, but the potential costs of not being prepared for major failures could be much higher.
Adam Tencza, member of the PayTel management board
Currently, the largest digital payment ecosystems are based mainly on online infrastructure. Offline payments are usually used in specific cases , e.g. on planes, in public transport, low-value transactions. This is dictated by the increased risk of payment fraud or the risk of exceeding limits. Changing this paradigm has been a challenge for the industry for a long time.
From a technology and security perspective , a connectivity-ready payment system should rely on a local element of trust – something that combines elements of an electronic wallet, offline limits, and a built-in authorization mechanism and is stored locally on the user’s device or means of payment.
Possible approaches include:
- Offline wallet – encrypted funds stored locally on a device (e.g. smartphone or card) that can be spent even without connectivity. Examples include offline CBDCs.
- Pre-authorized limits – the payment terminal or application knows a pre-defined “safe” amount that can be used by a given user and allows transactions up to this amount without the need for an online connection.
- Trusted token / chip – the card or phone stores data on the limit and account balance signed by the bank, which are validated locally by the terminal.
The future of such systems will be towards hybrid payment models , combining the features of traditional card transactions, e-money and central bank digital currencies (CBDC). The offline security element will become increasingly important: strong encryption, local biometrics and transaction duplication protection mechanisms.
CBDC projects enabling offline payments are already appearing on the market (e.g. the Digital EURO initiative led by the ECB with the participation of companies such as SIBS, ACI Worldwide, Banco Santander and VISA). Although this is still a developing technology, its main advantage is the ability to operate in conditions of lack of connectivity, while ensuring full control and accountability of transactions on the side of the central bank.
It is worth emphasizing, however, that building a completely new system from scratch and achieving an operational scale is a costly and time-consuming process. Therefore, from the perspective of strategic efficiency, it may be reasonable to rely on an already functioning and trusted infrastructure, such as local payment schemes, banking applications, or state-critical applications.
