UK banks are advancing toward the integration of tokenised sterling deposits into routine payment systems. This significant development comes as UK Finance initiates a live pilot project set to run until mid-2026. London-based tech firm Quant has been selected to establish the infrastructure for this programmable money initiative. Major participating banks in this pilot include industry giants such as HSBC, Lloyds, NatWest, Barclays, Nationwide, and Santander.
The pilot program is designed to evaluate the use of tokenised deposits in three specific payment flows:
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Person-to-person marketplace transactions: This mechanism will employ conditional and escrow-like logic to help mitigate scams, aiming to enhance transaction security for users.
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Remortgaging workflows: The focus here will be on synchronizing the release of funds with identity checks conducted by conveyancers and lenders, aiming to streamline the mortgage process.
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Wholesale asset settlement: This involves implementing instant delivery-versus-payment (DvP) systems that synchronize cash transfers with the exchange of securities.
Previous research under the UK Regulated Liability Network has demonstrated the feasibility of legal DvP transactions featuring automated synchronization of tokenised deposits and assets, as well as wholesale central bank monetary systems.
The preference for tokenised deposits stems from a policy initiative aimed at fostering financial innovation within the banking infrastructure. Governor of the Bank of England, Andrew Bailey, expressed in July that the utility of bank-issued or third-party stablecoins is questionable compared to the potential of deposit tokenization. It’s anticipated that the Financial Conduct Authority’s forthcoming stablecoin regulatory framework will not be finalized until late 2026.
The findings from UK Finance’s RLN research suggest that the adoption of programmability in financial transactions could significantly reduce instances of failed payments and fraud, while also streamlining processes associated with home buying. Quant’s role in this pilot will involve delivering the programmable money layer that facilitates tokenized deposit transactions, ensuring compatibility across various bank ledgers and the overall UK payment infrastructure, which includes facilities like RTGS/CHAPS, Faster Payments, and Open Banking interfaces.
Quant’s technology stack includes Overledger, an interoperability platform, along with PayScript, which enables programmable payment logic. Documentation from UK Finance outlines the cross-ledger design that the pilot aims to develop, incorporating shared-ledger orchestration and foundational capabilities for programmability.
The anticipated impacts of this pilot extend to several areas of financial operations, most notably fraud prevention and cost efficiencies. Current trends indicate that retail payments in the UK are heavily affected by authorized push-payment scams, and the introduction of programmability is expected to introduce conditions for the release of funds and verification of counterparties, thereby enhancing security.
UK Finance’s recent annual fraud report indicates an upward trajectory in both incident numbers and financial losses, particularly concerning remote purchase and impersonation fraud cases. Surveys from large banking institutions illustrate potential cost reductions as programmable money and tokenization become integral to payment processes and corporate finances.
Meanwhile, the exploration of sovereign-debt digitisation, including a pilot digital gilt instrument, is progressing in tandem. This initiative could further align with bank tokenization efforts, especially if on-chain settlement finality is validated.
As the pilot develops over the next 12 to 24 months, it aims to bring significant changes to the landscape of banking transactions:
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Marketplace P2P Payments: The introduction of conditional release mechanisms could lead to a reduction of 5–15% in losses from authorized push-payment scams.
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Corporate Payment Operations: By embedding rules for cash application and invoice management, businesses may see a 5–10% reduction in internal processing costs per transaction at scale.
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Remortgaging Processes: Coordinating fund releases with title updates could facilitate completion times from hours to sub-day, thereby minimizing fraud risks in conveyancing.
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Wholesale DvP Settlement: The implementation of atomic settlement for cash and tokenized securities could potentially achieve transaction completion on the same day within designated pilot environments.
The overarching framework supporting these initiatives aligns with the National Payments Vision, promoting the establishment of a trusted, next-generation payments ecosystem backed by clear regulatory guidelines and resilient infrastructure.
As the pilot aims to confirm the benefits of shared programmability across both retail and wholesale payment flows, successful implementation could prompt a broader rollout of these technologies in high-risk P2P transactions, mortgage completions, and targeted DvP asset settlements, with embedded safety measures against fraud being key from the outset.
