Ukraine showcases resilience in payments infrastructure amid war

In Ukraine, amidst ongoing conflict, the National Bank of Ukraine (NBU) has highlighted the importance of resilience in financial services, adapting its payment systems to ensure continued operations. This has been particularly crucial given the ongoing military actions that have targeted both digital and physical infrastructures. As of early 2024, despite the challenges presented by war, the NBU has facilitated an increase in cashless transactions, encouraging stores and essential service providers to prioritize non-cash payment methods. This shift helped reduce the public's reliance on physical cash, allowing for better management during times of crisis. Central to Ukraine's financial resilience has been the effectiveness of the System of Electronic Payments (SEP), which handles millions of transactions daily. Even in the face of cyber and physical attacks, the SEP has maintained its operation, demonstrating robust backup systems and processes. The NBU’s approach has included recommendations for businesses to enhance their infrastructure with alternative energy sources and improved cash collection frameworks to sustain their payment capabilities during blackouts and disruptions. With cashless payments gaining traction, the POS network has remained operational an impressive 98% of the time throughout 2024. Additionally, the NBU has observed significant growth in the merchant services sector, with a notable increase in mobile point-of-sale (POS) terminals, as well as a substantial rise in the e-commerce customer base. To enhance the resiliency of cashless transactions, backup systems employing QR codes have been implemented, allowing consumers to make purchases even when POS systems are offline. This adaptability highlights a forward-thinking approach amid crisis, suggesting that developing offline capabilities for central bank digital currencies (CBDCs) may be essential for future infrastructure. Experts warn that without offline capabilities integrated into CBDCs, the value of these innovations could diminish in scenarios where digital communications are unavailable. Although much of the current research focuses on online functionalities, lessons from Ukraine underscore the need to blend technology with time-tested methods to ensure that payment systems can withstand the adversities of war. The emphasis on offline capabilities over traditional cash usage redefines how financial systems can be designed to cope with crisis situations, ensuring that essential transactions can continue despite disruptions in digital infrastructure.