Mon. May 20th, 2024

The DirectPay Story: Building a Virtual Bank One Digital Brick at a Time

In recent times, Sri Lanka has made great progress in the realm of fintech. Yet we still have room for improvement. According to the Central Bank of Sri Lanka’s latest payment bulletin, cash remains the popular mode of payment for retail payments. The coronavirus pandemic has seen a surge in options for customers to make digital payments. 

Yet, this wasn’t always the case and for merchants, the challenges remain to accept such payments. Tackling both sides of this problem is the mission of DirectPay, which has set its sights on simplifying digital payments. As its CEO Kanishka Weeramunda puts it, “For a customer, payment is simply one component of the transaction. We want to make it convenient for them and the retailers to accept such payments. Be it with QR codes, cards, or any other form the customer prefers.” 

The startup was among the initial batch accepted into the HatchX virtual fintech accelerator – the first of its kind in South Asia. Earlier in 2018, it was approved as a Payment Services Provider (PSP) by the Central Bank of Sri Lanka. DirectPay aims to offer the simplest digital payment option for customers while serving merchants as the easiest facilitator for digital payments. This includes QR codes, bank transfers, or even remotely. 

Leveraging technology to offer convenience

Their flagship smartphone app, also called DirectPay, allows for digital payments from paying at the pharmacy to splitting a dinner bill while tipping the waiter separately. The process works by transferring funds between the bank accounts of customers and merchants locally through a clearinghouse which does not require third-party intervention. The result is that customers and merchants can avoid paying convenience fees to global payment networks and not require specialized (and often expensive) equipment. 

Yet, this is merely scratching the surface of DirectPay’s product portfolio. Since its inception, the company has developed an extensive range of solutions. From Internet Payment Gateways (IPGs) to POS terminals. Further, a novel product in the company’s portfolio is its Virtual POS terminal, which is aimed at small businesses. “With our virtual POS solution, the merchant doesn’t need any hardware. All they need to do is simply download the app. Immediately they can begin accepting payments by simply sharing a payment link,” explained Kanishka.

The common thread across DirectPay’s portfolio of products is that they’re all designed to meet the unique needs of businesses of all sizes. All the while allowing them to seamlessly accept digital payments. The technology is easy to use, is contactless, payments are notified immediately via SMS or email, and the user has a more comprehensive track record of transactions. 

“The DirectPay leadership collectively has almost 2 decades of experience in enterprise business between ourselves. We understand both technological innovation and business innovation. Our focus is to build innovative fintech products and introduce innovative processes to our customers to help them generate value,” said Kanishka describing their development philosophy. 

The challenges and future of digital payments

HatchX | DirectPay
Being among the first to introduce the concept of QR code payments in Sri Lanka, DirectPay was also among the initial adopters of the LankaQR payment standard when it was launched in October 2020

But, with digital payments come fraudsters and several (unsuccessful) attempts have been made on DirectPay as well. Due to its seriousness, fraud prevention mechanisms have been built in throughout the development process and still continue to be enhanced in line with new tech improvements. The other hurdle for new technology is getting enough people on board to make the system viable. It took about 6 months for slipless transaction apps to reach this level and over 1.5 years for QR codes since their introduction. 

During the lockdown which started in March 2020, the whole digital payments sector seemed to take off: Perhaps this was because everyone was at home and the runway was clear. Given that the virus can spread through physical cash, DirectPay even assisted micro-merchants by offering special rates. This enabled them to deliver essentials such as bread locally during lockdown without handling cash. As there is widespread mobile phone usage in Sri Lanka, the system will touch merchants islandwide and not just in upscale metropolitan businesses – from king coconut vendors on the street to village corner shops that sell essential goods.

Throughout this period, DirectPay reportedly experienced a 40% bump up in their usage. Commenting on this observation, Chief Growth Officer at DirectPay, Lakshan de Silva stated, “Prior to the pandemic, the average fintech saw a 5% increase in users. Hence, a 40% increase is a massive acceleration in adoption. Moving forward, the adoption of digital payments will continue. It’ll be somewhere in the middle of the numbers prior to and during the pandemic. Nevertheless, it will continue to consistently grow.”

The Origin Story of Direct Pay

HatchX | DirectPay
Over the years, DirectPay has been recognized with several awards, including at the 2018 APICTA awards in the Consumer Category.

Their parent company, PayMedia, has been in the banking sector for 7 years providing cash deposit machines (CDMs) and bespoke solutions to Sri Lankan banks. As they saw that the death of cash and check payments was approaching, they created DirectPay as a spinoff company focused specifically on tackling digital payments. 

Since then, DirectPay has won several awards including the 2018 Asia Pacific ICT Alliance (APICTA) award in the Consumer category beating 16 countries as well as the Best Start-Up and Best Mobile Payment Application awards at the 2018 National ICT Awards (NBQSA). They have been invested in by John Keells Holdings and are also a part of the HatchX fintech accelerator program which has brought them valuable mentorships and strong connections to the local banks with whom they worked toward their current achievements.

HatchX | DirectPay
The core philosophy of DirectPay is to simplify the process of accepting digital payments for merchants, in turn, passing on the benefits to consumers

“The fastest to 2 billion rupees worth of transactions – within 18 months.” Were words of triumph from DirectPay CEO, Kanishka Weeramunda, describing the handling of 1 billion rupees worth of transactions. With the three founders amassing about 30 years of enterprise-level experience between them prior to the inception of DirectPay, they have developed a process of innovating by first delving into the root cause of the problem and uncovering the real pain points. From these, the solution is derived. This level of involvement when dealing with issues is present even when they receive offers of investment, with them preferring enriching partners as opposed to purely injections of cash. 

Their main domains of operation are IPGs (Internet Payment Gateways), POS (Point of Sale), digital payment apps, whitelabel solutions, and Virtual POS with a host of supporting services built around them such as inventory management and providing credit lines to reputed retailers and suppliers. DirectPay seems to be turning into a default option for industries seeking fintech as a service, as they bring innovation and simplify processes to digitally increase efficiency. 

Multiple areas within as well as outside of the finance sector are handled from energy to insurance, logistics, electrical consumer products and even projects with the government. Their fellow fintech startups in the HatchX program partner with them for payment and settlement services as well. But, this is not DirectPay’s long game – they are biding their time.

The Master Plan

HatchX | DirectPay
Looking towards the future, DirectPay’s vision is to become a truly digital bank offering financial services at your fingertips through a smartphone

With the government’s support for the proliferation of digital payments and the onset of 5G adding to the mix, a lot of retailers are moving into the eCommerce space and creating a new environment for the modern consumer to live in. “Any fintech company who starts a journey with payments,” revealed Kanishka, “has bigger plans.” 

Pointing out that this is because working within just the payments sector will not generate large revenues for the company. Their endgame is toward building a completely virtual bank; no office buildings, no branches, and offering customers complete financial freedom with fully-fledged banking services. The plot thickens as they admittedly will not target all Sri Lankans as their customers. Rather, their key focus would be on millennials and those from Generation Z as they would be the crowd most open to never walking into a bank to conduct business.

HatchX | DirectPay
Given the preference of Gen Z towards digital banking, DirectPay is poised to capitalize on this trend through its efforts to simplify digital payments as it works towards building a digital bank

Processes within the virtual bank will also slightly differ from today’s internet banking norms. The creditworthiness of an individual would be determined by AI after analyzing social behaviours, transaction history and other capturable data points to decide what type of lending options can be offered. In addition to the standard savings account, there will be alternative lending options such as through the share market and crowdfunding as well. And due to minimal overhead costs, the rates would be better in comparison to traditional (physical) banks with their legacy systems. All this will be possible without the need for filling any physical forms and through the convenience of a smart device.

At present, no approval will be granted to start a virtual bank in Sri Lanka as it is not within the regulatory framework of the Central Bank of Sri Lanka (CBSL). However, DirectPay is working closely with the CBSL in order to clear a path to make it a reality. The journey may include joining up with an existing bank to obtain a license and then build an arm of co-banking services which could later serve as a springboard to further neo banking in the country. Since all the required tools for making this possible are already built, they have issued an open invitation to any forward-thinking bank to partner with them and realize this exciting vision for Sri Lanka.

By Arteculate

Arteculate is your guide to the Asian tech industry. We give you unparalleled insights, accurate, local tech news, thoughtful features and sometimes scathing opinions on where things are headed. Stay tuned for the best of Asia!

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