Mastercard looking to take advantage of untapped digital payments landscape in Sri Lanka

Chief Operating Officer - South Asia Vikas Varma

By Darshana Abayasingha

Only about 4% of payment transactions in Sri Lanka happen in digital form at present, but with growing dynamism in the market coupled with prevalent infrastructure, electronic payments could jump three-fold in this country, avers Mastercard – a leading global payments and technology business – Chief Operating Officer - South Asia Vikas Varma.

Growth of payments in Sri Lanka had been average due to the conflict, but once that ended Mastercard determined it must be present in Sri Lanka to serve the market better, and have since set up a local operation. Varma asserts that since then Mastercard has seen a clear upswing in dynamism in the market and is keen to be a partner to the country’s growth. 

Sri Lanka represents a young population with a very high human development index who is open to innovation and new technology. At present, the country is viewed as a middle-market economy, and with increasing foreign investments and with a stable government coming into place with consistency and clarity in policy, there is great potential and room for economic development, he says. 

“Currently electronic payments are just 4% of personal consumption expenditure in Sri Lanka. One of the missions we have is a world beyond cash. Given the increasing affluence and the penetration of banking and financial services, smartphones, high quality telecom infrastructure and youth I think we are currently at inflection point where electronic payments will probably jump two- three-fold over the next five years. We are well penetrated from a partner standpoint. All financial institutions who can get into payments form a card standpoint are our customers, so we are 100% penetrated. We are now looking at opportunities to work with fintechs, telcos and large merchants, because all of these constitute the eco-system and you need multiple parties to come together and work to get large market movement underway. One of the big pieces to our Sri Lanka strategy will be partnerships and coalitions, its best done with like-minded partners.” 

A level playing field 

From multiple digital payment methods, Varma believes mobile initiated transactions will become most popular in Sri Lanka due to advanced infrastructure, availability of smartphones, low data cost and people becoming more tech savvy. 

These are all very strong tailwinds for consumer of adoption, and therefore Mastercard is working with fintechs and telcos at large. In terms of regulations, his company’s primary ask is for a fair and level playing field to operate in, and have access to infrastructure and capabilities as everyone else. Mastercard is working closely with stakeholders who influence policy here to drive those outcomes through education, drawing parallels from what’s happening in other parts of the world. 

Governments are progressing driving open interoperable easily accessible eco system for payments, which is good for everyone. Also, having standards drops cost for the eco-system. Standards allow for adoption in a universal manner making way for ubiquity amortised over a much large base, rather than having small closed loop pools of consumers. How does South Asia differentiate from the rest of the world in terms of digital payments and prospects?

“One is the demographic dividend. South Asia is home to over 20% of the global population which is huge, and the average median age in all of these markets combined is sub-30, which means a lot of youth and a lot of openness to innovation and behaviour can be moulded and changed. Then inward remittances. These markets – Sri Lanka, Maldives, India, Bangladesh and Nepal – are home to about 22% of the global inward remittance anywhere, which is a critical piece for balance of payments. Then the very dynamic nature of the telecom and fintech related eco-system. India has the cheapest data costs in the world. The average consumer uses 300-400MB of data a day in these markets. The fintech system creates a lot of utility, providing a lot of new capabilities for merchants and financial institutions. This makes South Asia a very dynamic market for payments and innovation.”  “In my mind, South Asia today is a first wave market. For many things many would consider South Asia to be a wave 3 market in some categories. I would say in the space of payments, technology and innovation especially fintech, I would say India is a wave 1 market, and so is much of South Asia. We set the standards and new paradigms for others to follow. A lot of us didn’t have land lines we went straight into mobile phones, whilst some countries are still on feature phones we are on smartphones. The costs have dropped and there are over 500 million smartphones already in South Asia. That is the second largest smartphone population in the world outside China. So young people with smartphones, with great data quality, fintech and applications with the ability to connect and do commerce both locally and globally is a strong combination.”

Future of cash and transactions

Varma also points to strong government policy in the region, alongside stability, to drive long-term digitisation programs and far-reaching economic reforms. With lots of money entering the formal economy from the grey, coupled with growing disposable incomes and connectivity, the only way now is up with what is a heady mix. 

He adds that whilst their mission is a world without cash, 85% of transactions on average globally still takes place physically. In Sri Lanka the figure is 96%, and in India it has dropped to 85%. In Europe and the US the figure is down to 65%, whilst South Korea is probably the most advanced market with only 35% of transactions taking place in cash. Accordingly, even in much of the developed world two-thirds of transactions take place in cash, and whilst a cashless society may never come to be a ‘less cash’ society is possible. 

Commenting further on Sri Lankan operations, Varma asserts that Mastercard is determined to become leaders in digital payments in the country in quality of capabilities it deploys here and the way they are deployed. The company is determined to help various stakeholders in the economy through partnership, especially at grassroots level, to be more involved in economic activity not just with payments. “Currently, most people will see us as a payment network brand, and you see our brand mark at a merchant outlet, which gives you confidence, but we would also like to do much more. 

“We are open to expanding our operations here. At some point of time there will be critical mass in this market to also host a larger complement of people here.”

Pic by Shehan Gunasekara