Central bank digital currency Offline transaction
I read that the China CBDC has a feature to allow the e-wallet to make offline transaction, i.e. the parties does not need to have an internet connection.

It does not explain how this is done.

I believe that this feature will be difficult to implement and may require both parties to have a mobile app. The current balance will need to be stored in the mobile device and updated into the server when the internet connection becomes available.

If the customer uses a payment card, the card may need to have the balances stored in the card and updated for offline transaction.

This feature will add complexity to the app and the payment card.

I think that this is unnecessary and should be avoided. 

I wish to address how to deal with the situation where the digital payment cannot be made due to unavailability of internet. 

The unavailability could be due to any of the following situation:

a) The customer does not have internet connection on his mobile device
b) The merchant does not have internet connection on his mobile app
c) There is a breakdown in the internet network

In the case of (a), the customer can use a payment card, which does not require an internet connection. In practice, most customers would probably prefer to pay by a payment card anyway, rather than a mobile app. Some customers may use the mobile phone to act as a payment card. This does not require an internet connection.

In the case of (b), the merchant is likely to use a data card in the mobile phone as well as a WiFi connection in the business premise. The risk of unavailability of internet is low.

The risk of (c) is likely to be low, as the mobile phone network has redundancy. In any case, if the mobile network is done, the users will not be able to use the network to make calls, which would have more serious consequences. 

Here are some possible arrangements to handle payment when the digital payment is not available due to (b) or (c).

1. The customer can still pay cash. This can be offered in an emergency.
2. The customer can come back later to make the transaction or can arrange to pay later. 

A temporary disruption of business is not a serious matter. Some shops put up a sign that they are temporary closed when their staff is not available. The shop may run out of stock. 

As it is quite costly to implement the offline transaction in the payment platform, it is better to accept a temporary disruption of business due to the unavailability of internet connection.

Tan Kin Lian
 

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