In a country where 50% of the population has a smartphone, one would assume that going cashless is a click away. But it’s easier said than done, Channa de Silva, the General Manager & CEO of LankaClear says. “We have 23 million debit cards in circulation, which is more than the population of the country. But most people use it to simply collect cash from an ATM.” Despite a flurry of fintech applications in recent times, consumer adoption of cashless payments remains low.
A crucial factor that’s holding back this adoption has been a pushback from merchants. This is often due to the 3% commission merchants bear for card payments. “If you look at the retail sector, cash is still a preferred mode of payment. Nearly 90% of retail transactions were by cash. If you’re making a sale worth over Rs. 100,000 like at an electronics or furniture store, then 3% isn’t a big deal. But for a baker selling a loaf of bread, that 3% might be their profit!” explained Channa.
Recognizing these issues, LankaClear went to the drawing board. Exploring how to increase cashless payments, the focus was to reduce the costs for merchants and offering convenience towards customers. When it comes to merchants, LankaClear looked at popularizing the use of POS terminals, while reducing the cost of transactions. For consumers, it was all about leveraging the power of mobile connectivity. Finally, to address these challenges, LankaClear recently launched 3 new products at all levels.
JustPay
JustPay is not an app, Channa asserts. “It’s a payment mode.” It allows customers to make cashless payments directly to the merchant’s account. The clear benefit being without the commissions usually associated with such payments from merchants. It’s a system designed to enable fintech startups to offer simplified cashless payments for both merchants and customers.
With JustPay you can sign up for any fintech app with your banking credentials. Then with a few taps on your phone, you can make an instant payment to the merchant. “A fintech will partner with a bank and the merchant will have an account in that same bank. But with JustPay, fintech startups can now cater to customers of any bank seamlessly,” elaborated Channa.
The key pieces of the puzzle enabling this are the LankaPay Common EFT Switch and a real-time digital signature from customers. Offered at the time of registration, this digital signature is a mandate allowing fintech startups to withdraw money for payments. Alongside this simplicity offered to customers, JustPay also reduces the costs for merchants. Leveraging fintech apps means merchants won’t need to invest in a POS terminal. Importantly, the commission charged on each transaction is only 1% or less.
PEN – Payment Exchange Name
With the introduction of JustPay, LankaClear aims to simplify cashless payments utilizing smartphones. But everyone has access to a smartphone. “When you get in a PickMe or Uber, you’ll want to pay with your smartphone. But when the driver goes to the market to buy vegetables for his family, the sellers don’t accept cashless payments. So he’ll have to go to the ATM and withdraw cash,” said Channa offering an example.
He went on to point out, “If you look at this transaction, it’s not one between a customer and a merchant. It’s just between 2 people. For cashless payments to work for low-income earners, we must enable peer-to-peer transactions. It’s for this reason that we developed the Payment Exchange Name system.”
The Payment Exchange Name (PEN) system is a peer-to-peer fund transfer system designed by LankaClear. It works by using nicknames attached to bank accounts and the personal mobile number of the recipient. As such, a person needs to only share their mobile number and the nickname of their bank account when transferring funds. Thereby simplifying the process greatly as nobody needs to remember details like bank account numbers, branch details or even the name of the bank, etc.
LankaQR and Smart Messages
Building on top of JustPay and PEN, several other initiatives have launched towards encouraging cashless payments. One of these is the LankaQR initiative by the Central Bank of Sri Lanka. In simple terms, LankaQR is a universal standard for QR code payments. Meaning you can now use any fintech app of your choice when making QR code payments.
Behind the scenes, the LankaQR standard utilizes the JustPay platform and the LankaPay – Common EFT Switch to offer this universal support. Channa added the LankaQR standard can be utilized in conjunction with the PEN system. “When you scan the QR code, the app knows the account details to transfer the money. Alternatively, the QR code can store the PEN nickname and mobile number.”
Another initiative being explored is smart messages for payments. Explaining the concept, Channa said, “Many of us get text messages reminding us of bills we have to pay. In their current form, they’re spam. With smart messages, you’d also get a link that you can click to instantly pay with the fintech app of your choice.”
A cashless future around the corner?
Looking at the digital payments landscape in Sri Lanka, Channa firmly believes that the right technology is there. But admits, “The adoption has been slow” A phenomenon largely attributed to the convenience of cash. For digital payments to be the norm, it must be more convenient than using cash. A tough task, given the prevalence of ATMs.
Yet, Channa is optimistic about the future. He believes startups that can offer convenient services to customers will drive digital payments. In doing so, building much-needed thrust for digital payments. Towards this goal, LankaClear knows where it stands. As Channa puts it in his own words, “We’re not going to build apps. Our focus is clear. We will make the backend seamless to accept digital payments. Thereby enabling entrepreneurs to build innovative startups that utilize technology to offer convenience to their customers.”