Design note - Product strategy

Design notes

In January, we published a design note on the blueprint framework, which identified the four key components of the digital pound blueprint:

• Product vision and strategy – The digital pound proposition, including how a digital pound could meet our policy motivations and the utility a digital pound could provide.
• Scheme and regulation – The terms and standards for the use and operation of a digital pound.
• Technology – The conceptual and logical design of the technology platform for the core digital pound infrastructure, and how intermediaries would interact with it.
• Operations – The different roles, functions, and levels of service required for a continuously available, secure, and resilient digital pound infrastructure.

This note focuses on the product strategy, setting out our current thinking on how a digital pound could deliver value and support our policy motivations, taking us closer to our vision.

We welcome feedback to help refine our proposals.

Strategic context: The role of a product strategy

The two primary motivations in considering a digital pound are:

Preserving the singleness of money – meaning all forms of sterling money are valued equally and interchangeable with each other. This underpins confidence in the monetary system and enables efficient financial system operation.

Supporting innovation, choice and efficiency across the UK payments system.

These primary motivations guide our work during the design phase. A digital pound would complement physical cash and ensure that the public continues to have access to public money in an increasingly digital environment.

In the proposed public-private platform model, the Bank would operate the core ledger – providing a secure and resilient foundation – while regulated private firms would deliver user-facing services. These intermediary service providers (intermediaries) would be responsible for onboarding, customer service and the development of digital pound services.

The product strategy aims to set out how a digital pound could support the primary motivations and provide meaningful utility to individuals, businesses, intermediaries, and the wider ecosystem. It is grounded in the conditions and trends of today’s retail payment landscape, while remaining adaptable to future payments use cases and preferences we cannot anticipate.

Product strategy

Business acceptance of the digital pound would not be mandated, and the provision of digital pound services will not be a requirement for any bank, payment service provider or any other business. Instead, the Bank would need to enable intermediaries to attract individuals and businesses (end-users) to pay and be paid using digital pounds, reaching adoption levels necessary to support our primary policy motivations.

Consistent with the history of other large-scale payment infrastructures, adoption of the digital pound is likely to be a gradual process. As is industry best practice, the Bank is working to establish a product strategy that sets out our approach to consumer and merchant adoption following the launch of a digital pound. Having confidence in the rationale behind our product strategy, as well as our ability to execute it, is critical for our assessment of whether we can deliver on our policy motivations for a digital pound.

The initial product strategy would focus on enabling intermediaries to deliver a compelling proposition for individuals, aligned with key adoption drivers identified through consumer research. However, the utility of the digital pound depends on both individual usage and merchant acceptance. While individuals are the primary focus in early stages, merchant readiness at launch is necessary to ensure the digital pound can be used in practice. As adoption grows on both sides of the market, intermediaries will be able to expand their offerings, including services that allow businesses to realise operational benefits from using the digital pound. An expanding product proposition for individuals and businesses will continue to drive end-user adoption of the digital pound, forming a customer base that attracts intermediaries to provide a range of innovative services to in the long term.

End-user product proposition

Intermediaries, not the Bank, would design and provide the digital pound ‘product’ to their customers, both individuals and businesses. The Bank, through its design choices across the scheme, technology, and operational framework, would enable intermediaries to offer services that meet individual and business needs and provide value, but PIPs would design the product.

Rather than assessing the impact of each design choice in isolation, the Bank can consider a set of outcomes it desires to achieve through its design choices. These desired outcomes build on our policy motivations, design principles, and vision for the digital pound, and realising them should help intermediaries deliver compelling use cases to their customers.

In bringing about desired outcomes, the Bank, through its design choices, would aim to create conditions under which the following three priorities can be appropriately balanced:

• Enabling intermediaries to deliver a wide range of valuable use cases to individuals and businesses.
• Supporting product differentiation by intermediaries, encouraging innovation and participation in the digital pound ecosystem.
• Maintaining a sufficiently coherent experience for all digital pound end-users, ensuring public confidence and trust in the product.

Informing our design choices

When making design choices for the digital pound, the Bank must consider how it could be used and provide value to individuals and businesses. Our design choices must aim to bring about outcomes that enable intermediaries to deliver these and other use cases to their customers.

To better understand how the digital pound could provide value to end-users, the Bank conducted research into what drives individuals and businesses to adopt a particular payment method. It was found that both individuals and businesses look for convenience and control of payments, with individuals also being attracted to greater payment protection and guidance on how a payment works, while businesses aim to lower the cost, and improve the experience, of payment acceptance.

The table below sets out some of the outcomes the Bank aims to achieve through its design choices, along with example use cases that intermediaries could deliver to their customers as a result. These examples are illustrative, not prescriptive, and are intended to show how the digital pound design could translate into real-world experiences:

Digital pound product roadmap

Enabling intermediaries to deliver digital pound use cases in stages, as defined by a product roadmap, would allow the Bank to manage risk, respond to feedback and remain adaptable to future developments. This approach aligns with industry best practice for large-scale technical infrastructure and reflects lessons from other payment innovations.

Each stage of the product roadmap would prioritise intermediaries delivering a specific set of capabilities for digital pound end-users, with each creating new digital pound use case possibilities.

During the design phase, setting out a highly detailed product roadmap with granular stages would be unnecessary given how we would expect a roadmap to evolve ahead of a digital pound launch, particularly following continued engagement with industry and external developments in retail payments. Instead, we have used a high-level, three-stage structure to reflect our product strategy – Initial, Near and Later.^{footnote [1]}

Prioritising what to enable in the Initial stage

We must decide which capabilities the Bank should aim to enable for delivery, at scale, in the Initial stage. Striking the right balance at launch of having an attractive product proposition while appropriately managing risks and costs could be critical to the long-term success of the digital pound in delivering on the core policy motivations.

By ‘at scale’, we mean that the infrastructure, rules, and operational support must be in place for intermediaries to be able to deliver an in-demand product feature reliably and securely to all who wish to utilise it. We would expect capabilities that are more complex to reach this point gradually, with testing and rollout beginning some time before becoming widely available. This could be for a variety of reasons, such as requiring updates to existing payment infrastructure, requiring the time and investment of ecosystem participants other than the Bank, requiring specialised scheme rules and regulations, or potentially having a sudden impact on transactions volumes.

We consider the following factors to be of key importance when making a judgement on the number and complexity of capabilities the Bank should enable in the Initial stage of the product roadmap.

We propose a moderate approach to the number and complexity of product features in the Initial stage, balancing the above factors to give us the best chance of executing our product strategy. The goal is to ensure the Initial stage proposition provides a credible and stable starting point – a digital pound that’s well received by the public, while also reliable and secure, and flexible to future development. Based on this approach, here is a simplified, non-exhaustive proposal of end-user capabilities the Bank would look to enable in the Initial and Near stages of the digital pound product roadmap.^{footnote [2]}

Initial stage – potential product proposition for individuals and businesses

Individual proposition – convenient peer-to-peer (P2P) experience and expansion of public money acceptance

In the Initial stage, individuals would have the option of using account identifiers (aliases) such as a phone number or username, allowing them to easily share their account details and make P2P payments. Based on the adoption growth European payment services have seen when focusing on providing their customers with this capability, not currently available in the UK, it could position the digital pound as a convenient P2P payment option.

Additionally, enabling businesses to easily accept digital pound payments for online purchases in the Initial stage would provide consumers in the UK with the option of using public money for e-commerce shopping, expanding where the public can use money issued by the Bank of England for retail purchases.

Business proposition – a straightforward way to accept digital payments

In the Initial stage, a digital pound account could provide merchants with a low hassle, convenient way to accept digital payments. Digital pound payments could be settled instantly, giving merchants immediate access to the funds, potentially benefitting their liquidity. Merchants could accept e-commerce payments, which currently make up ~60% of retail payment value in the UK (predicted to increase),^{footnote [3]} in digital pounds. Accepting in-store payments would also be an option, made via a customer’s smartphone (eg scanning a QR code), leveraging the infrastructure used for digital pound P2P payments.

Larger merchants and those with high traffic brick-and-mortar locations may be more comfortable waiting for the digital pound to become a more ‘tried-and-tested' payment method before opening an account and accepting it. It might require significant investment from these merchants and potentially impact the experience of their customers. They could feel inclined to open a digital pound account earlier however, if its acceptance is demanded by their customers who value it as a payment option. It is also possible that, by the Initial stage, these merchants will be accustomed to accepting new forms of money and payment from their customers both domestically and in other countries,^{footnote [4]} making it more straightforward for them to begin accepting digital pound payments than it would be at present.

Controlling risk – Point-of-Sale (PoS) terminal and Near Field Communication (NFC) proposed to be available at scale in the Near stage

It may be necessary to roll out software updates on PoS terminal devices to use them when accepting in-store digital pound payments.^{footnote [5]} If necessary, the rollout of software will require the time and investment of other actors in the digital pound ecosystem, such as intermediaries and merchants. The Bank would expect this rollout to be a gradual process, especially given the fact that the PoS terminal landscape is not uniform, with a wide range of devices currently used by merchants who typically maintain them for several years without replacement.

Assuming a gradual rollout process, the Bank would aim to achieve nationwide, reliable, and secure PoS terminal (NFC) digital pound acceptance in the Near stage, with testing and rollout to begin earlier, in the Initial stage. The Bank acknowledges the importance of PoS terminal (NFC) acceptance for the long-term digital pound proposition, but also the strategic benefits that can arise from gradual integration, helping the Bank to manage payment growth, and the operational and performance risks its presents, as it deploys digital pound infrastructure at scale for the first time.

Next steps and how to engage

Developing the product strategy for the digital pound is an iterative process. We will continue to work with a wide range of stakeholders – including payment firms, banks, merchants, fintechs, charities and infrastructure providers – to test our assumptions and better understand existing and emerging payment needs.

As the design phase progresses, further design notes and technical experiments will support ongoing development of the digital pound blueprint. These will help clarify how core features could work in practice and how different elements of the ecosystem could interact. The product strategy set out in this note will continue to evolve based on this work.

We welcome feedback on the content of this note, particularly on:

• the product strategy for the digital pound and use cases that would provide value to individuals and businesses; and
• our product roadmap proposal, in particular the Initial stage product proposition.

Comments can be submitted via email to CBDC@bankofengland.co.uk

Further updates on the design phase and related publications are available on The digital pound page of our website.