LankaPay Common ATM switch hits 3,000; boosts financial inclusiveness

Fulfilling the nation’s mandate in increasing financial inclusiveness, the sphere received fresh boost with the number of ATMs connected island wide to the LankaPay National payment network crossing the 3,000 mark which accounts for almost 90% of the ATMs in the country.

In realising Sri Lanka’s vision of having all segments of the nation to have access to financial services and systems, LankaPay with the guidance of the Central Bank of Sri Lanka successfully reached the milestone when Sampath Bank recently connected to the switch to join 13 other banks who were already on the switch, allowing citizens increased reach to their finances.

LankaClear in 2013 launched the Common ATM Switch under the brand name ‘LankaPay’, which revolutionised the ATM based services in the county.

Since it went live three years ago with just 900 ATMs that was brought into the network by the Government owned banking giants Bank of Ceylon (BOC) and People’s Bank, today the infrastructure has expanded by more than three folds and counting.

The common ATM switch essentially brings top financial institutions onto one platform allowing a sizable proportion of the public to have affordable and secure access to ATMs that are not from their respective banks. The system allows a ‘common’ usage of the ATM facilities that are deployed by individual banks by the customers of all banks creating a high level of convenience and cost saving to customers.

Not leaving out smaller banks as it is they who increasingly serve the rural populace, LankaPay also offers the facility of a shared ATM switch, which is a unique hosted solution. Institutions that do not have their own ATM switch can still offer this essential service to their customers and get them connected to the LankaPay network through this facility.

The recent addition has resulted in more than 3,150 of the ATMs getting connected (almost 90% of ATMs) to the LankaPay National payment network, and with the directive of the Central Bank pushing all banks to be part of the switch it is certain that the general public will soon reap the benefits of 100% connectivity.

Although the financial regulator had directed all banks to be part of the switch by 31 March, a delay in this regard is experienced due to a few international institutions experiencing a lag owing to pending approvals from their respective headquarters. Nevertheless, the national payment network is confident of all banks coming on board soon to allow citizens across the country to have improved financial access. 

Looking at the common ATM infrastructure from a national payment system perspective, it helps in establishing a centralised network, unified system rules and procedures governed by the Central Bank, creating inclusiveness across all demographics. Since the settlements of the interbank transactions are carried out by the Central Bank, it also ensures the mitigation of associated financial system and settlement risks.

From the information security point of view, the common ATM infrastructure makes it possible to establish standardised information security measures. While ensuring all members follow the set regulations, it would provide users the highest level of security possible.

With convenience being a key feature of the common ATM switch, it also brings about the much sought advantage of economies of scale. It typically allows large transaction volumes to flow through centralised systems to reap the benefits of cost efficiencies via economies of scale. 

In an effort to maximise the usage of the ATMs connected through the switch, LankaClear Chairman Anil Amarasuriya stressed the need for all banks to come on board together to educate the banking population of the benefits of using connected ATMs.

While there is still a hint of reluctance in using an ATM of another bank for cash withdrawal amongst other services, he urged the need for the convenience factor to be further conveyed.

“All stakeholders along with LankaClear will have to get together and educate the customer of all the benefits including the convenience factor. One doesn’t have to go to your own bank’s ATM; he can simply go to any ATM that is linked to the LankaPay network to obtain the same service. This message requires more attention of the general public,” said Amarasuriya.

As the apex body under the brand name of LankaPay is steering the promotional efforts in this regard and recognises that as the provider of the national switch it must take the effort of creating awareness on what is available to the customer and the benefits of the same.

“We hope the banks will join us in this effort of creating awareness when they are conducting their own advertising and marketing efforts. We urge them to include in their campaigns the fact that customers can go to any ATM connected to LankaPay, not only their own banks, to be serviced,” added the Chairman.

Implying the importance of the technology to help push economic development through increased activities, LankaClear Chief Executive Officer and General Manager Channa de Silva highlighted well connected ATMs are essential to not only reduce the cost of establishing branches of banks but also to reduce the duplication of resources. 

“When looking at the banking infrastructure, if they all have to establish a branch in every town and village there is a significant cost to the banks. ATMs are technically unmanned devices that run 24 hours a day, seven days a week. The whole idea is giving people access to their money without incurring cost of having to establish a branch. In that sense the adoption of ATMs has taken off and widely available all over the country,” he explained.

The consumer behaviour LankaPay is striving to change is the increased use of any ATM immaterial of which bank it belongs to, and this it believes can be achieved by reducing the transaction cost. The idea is for this to become a habit than being an exception.

“We have been successful in significantly bringing down the transaction cost. Previously the cost per transaction stood between Rs. 50 at low end and Rs. 200 at high end, whereas after connecting to the LankaPay network the ATM per transaction charge has been significantly reduced to Rs. 30. This is commendable, however, we are currently working with all the banks and strive to bring this further down in the near future to help this cause,” shared de Silva.

Notable is also the acceptance of the infrastructure as the number of transactions is observed to be on a positive growth trajectory. Latest figures show that Sri Lanka has exceeded two million inter-bank ATM transactions per month, and this number is expected to grow exponentially in the coming months. 

“Now that most of the banks are connected to the LankaPay National Payment Network, I believe people are increasingly starting to use ATMs of other banks. There are few progressive banks that have come forward and are offering their customers the service for free or at a lower charge. We anticipate more banks to follow suit, which will help the effective use of resources,” opined de Silva.

Taking a step further to ensure ATMs are used in an efficient manner, the LankaClear CEO urged the concept of ‘ATM on wheels’, which means typically about employing mobile ATMs. 

Deploying mobile ATMs will allow banks and financial institutions to truly bring the convenience factor to the door step of the customer. The mobile ATM would allow banks to expose their brand to attendees at community events, fairs and festivals, concerts and sporting events. It will also enable their customers the convenience of accessing their money without having to travel for miles looking for an ATM especially in a rural setting.

Such ATMs can also help to relieve branch level traffic at high-volume locations. 

“One of the things we are also seeing in terms of volume is that in Colombo, Kandy, Gampaha, Kurunegala and Kalutara Districts, more ATMs are required to be deployed due to higher population. But, there are other areas where transactions per ATMs are significantly low due to the presence of higher number of ATMs despite having a lower population. In that scenario we urge the banks to either relocate some of their ATMs to increase the utilisation or use mobile ATMs at places where people need cash to make payments. In some of these locations where people need cash for making payments, such as the Sunday fair, you don’t need an ATM 7 days a week, but only on specific days. This will ensure higher utilisation per ATM, which in turn will lead to a higher return on investment,” he professed. 

While rolling out a system does not necessarily make it successful, it was stressed that financial institutions need to take the initiative in making transactions increasingly convenient and cost effective. Another potential innovation is for banks to introduce payroll cards or top up cards to attract unbanked or underbanked population to utilise the existing banking infrastructure. With LankaPay providing the necessary secure and reliable backend infrastructure, financial industry is provided with a plethora of similar new opportunities to explore.