The COVID-19 pandemic significantly transformed several aspects of our lives. Notably, being unable to travel to ATMs to collect cash had us embrace digital payment solutions. For business leaders, it was a reminder that a company’s strength lies in its agility, especially its ability to make and receive payments. Especially now, as we deal with an economic crisis where power and fuel are increasingly uncertain, the reliance on physical processes is proving to be a costly hindrance holding back companies from growing.
Sri Lanka is no stranger to cashless transactions. In fact, since 2002, one Sri Lankan company – LankaPay (formerly known as LankaClear), has worked tirelessly to build cashless payment platforms. Today, they serve as critical digital infrastructure for banks and financial institutions, enabling everything from instant bank transfers, QR payments, and even payments with any fintech app. Building their digital offerings atop these platforms by LankaPay, the banking industry now facilitates digital payments in several forms for large corporations, small businesses, and even government departments. In conversation with Arteculate Asia, the CEO of LankaPay, Channa de Silva, shared how its platforms are building a cashless Sri Lanka.
Why should businesses go cashless?
Even before the digital revolution, the pandemic amplified the shift to cashless, which was well underway. Here in Sri Lanka, too, the foundation was in place. However, progress was slow. For example, in 2019, there were 23 million debit cards in circulation in Sri Lanka (more than the country’s population). Yet, these were primarily used for gaining access to an ATM. But why is it important to go cashless? Or rather, why is it essential to embrace digital payment systems? The short answer is practicality.
Technology has reshaped many aspects of our lives. We now have virtual alternatives to many things we consider “physical” activities, which have changed how we do business. For example, the old systems of visiting the bank, filling out physical paperwork, using cheques, and so on are now inconvenient and costly, especially with the fuel crisis. In their place, we now have several digital systems that allow for secure real-time transactions. LankaPay has pioneered the development of many such systems in Sri Lanka. Many of them are now critical digital infrastructure in the banking system.
The unparalleled agility of a cashless enterprise
Analyzing the current business environment, Channa notes that corporates have already made several changes to their operations. These adjustments include transformations to making payments both within and outside the company. “Historically, corporates have largely relied on cheques. But as a payment method, they’re quite cumbersome,” Channa explained.
Typically, a single cheque requires the sign-off from multiple people and then physically handed to a recipient who again has to visit a bank. Even after this, processing and realizing payment can take a few business days. “This traditional payment method no longer caters to current business practices. Businesses are going much faster, and this kind of payment method holds them back.” As such, they’re now opting for digital payment solutions offered by banks, which have been made possible by LankaPay.
Instant secure digital transfers with SLIPS and CEFTS
LankaPay’s portfolio of payment platforms allows banks to offer corporates the logistical flexibility they need to operate cashlessly. Its platforms, such as Sri Lanka Interbank Payment System (SLIPS) and the LankaPay Realtime Payment System (CEFTS), allow businesses to make instantaneous digital transactions. SLIPS handles pre-authorized small-value bulk payments, such as standing orders, salaries, utility payments, etc. For enterprises, SLIPS enables them to make digital payments efficiently and securely. Meanwhile, CEFTS allows real-time online bank transfers within seconds to be done 24×7 and 365 days a year. The system supports instantaneous transfers up to LKR 5 million, which is well-suited to meet the daily needs of even the largest organizations. Even if this limit needs to be increased, it can be done within 24 hours.
LankaPay Government Payment Network: Enabling a digital government
Another challenge corporations face is paying taxes and other mandatory government payments. This issue stems from the fact that many public organizations have manual processes. As such, it demands a dedicated employee running from pillar to post for each payment that needs to be made. Thus, LankaPay introduced the LankaPay Government Payment Network to make digital payments to various government departments. Today, it allows corporates to make direct online payments to Sri Lanka Customs, Inland Revenue Department, EPF department, Ports Authority, BOI, Sri Lanka Standards Institute, and Import/export control department, etc. Thus, the system simplifies paying taxes and other fees to government departments with only a few clicks.
LankaSign: Enabling secure digital transactions for any organization
Over the past few years, several enterprises have focused on digital transformation even before the pandemic. Yet, a handful of processes are still done manually, and document signing is the best example. Digital signatures are a secure solution that offers digital certificates guaranteeing a document is unaltered, which notably ensures the integrity of financial transactions. Using digital signatures also enable approvals to be done remotely and instantly.
Digital signatures can revolutionize any organization’s back-end operations. Realizing this potential is LankaSign, which is Sri Lanka’s only authorized CSP, operated by LankaPay and uses military-grade security equipment. While compliant with the Electronic Transactions Act (ETA), it is also ISO:27000:2013 certified. Originally, LankaSign was used for payment-clearing functions. Today, its digital certificates are offered to any external party and are used by 600+ public and private sector organizations, with over 1 million certificates being issued.
Enabling small businesses to go cashless and grow
Large corporations are different beasts from small businesses. They have very different challenges and requirements, especially financially. Chief among issues for a small business, especially customer-facing companies like retail businesses, is collecting payments. This is where LankaPay’s platforms offer small companies several options to receive digital payments. Primarily, there are real-time CEFTS transfers between bank accounts. In the context of a small business, there are no merchant commissions they have to bear as with credit or debit cards.
Regarding credit/debit cards in particular, beyond the commissions, it’s a high cost to obtain the machines for such payments. But today, by utilizing QR codes, a small business can accept digital payments without investing in card readers. Instead, they can print out a QR code on paper and display it. Afterward, the LankaQR by LankaPay, allows customers to scan these QR codes with any fintech app and instantly make a payment. Thus, again reducing the barrier to accepting digital payments.
Connecting several fintech apps in Sri Lanka is JustPay, a unique payment mode created by LankaPay. With it, customers can use any fintech app to make cashless payments. Meanwhile, merchants can accept cashless payments without the steep commissions usually associated with such transactions. JustPay is a digital backbone connecting the different fintech solutions in the market.
What does Sri Lanka need to go cashless? Embracing change
Regardless of the size and structure of a company, Channa explained that for digital payments to go mainstream in Sri Lanka, the banks and financial institutions will play a key role as facilitators. Already, the Central Bank has begun promoting progressive policies for cashless payments. “The consumer is changing, and so, our financial institutions need to change with them,” he said, “The robust infrastructure built by LankaPay is set to be the foundation of a cashless Sri Lanka as banks and financial institutions embrace them.”
Channa explains that changing consumer attitudes mean banks and financial institutions are now reevaluating their offerings. Particularly younger customers (Generation Z) have a different mindset and approach to money than generations before. These younger generations eschew long-term financial commitment and focus more on investing in life experiences. Importantly, they are digital natives with no interest in physically visiting a branch for banking activities.
Banks and financial institutions must understand the shift in their customers’ needs. Accordingly, they must adapt their digital offerings by leveraging products like those by LankaPay and embrace constant innovation. Like any other service industry, the banking sector needs to adapt. “The banking model is going to change,” de Silva said, “and banks and financial institutions need to go beyond the traditional deposits and lending business model and cater to more to transaction banking and the changing needs of the people.”