Moving the nation towards a paperless economy

LankaPay, the trusted national payment network, which is the backbone of the monetary and financial transactions in the country, plays a key role in the country’s economic development. However, it should be noted that developing a national payment network is a long-term process to essentially reduce the overall transaction costs and expand opportunities to carry out commercial and financial transactions electronically in an economy. 

Reforming payments systems is crucial for financial stability and has a direct impact on the local financial system and LankaPay, over the years, has strived to ensure the impact is a positive one.

Financial inclusiveness

LankaClear’s newly-appointed CEO Channa de Silva asserted that our priority is to support banks and financial institutes to reach rural masses, which accounts for 70% of the nation’s population.

“Our vision is to enable financial inclusion of the rural population that is currently excluded from most of the electronic payment modes. With our objectives clearly spelled out, LankaPay strives to be The Trusted Payment Network that the masses use to carry out their daily financial transactions using easy to use and secure technology,” emphasised de Silva. 

LankaClear was set up initially as a cheque clearing house, but has been successful in establishing itself as an important hub to interconnect financial systems of all the banks and financial institutions. The primary focus of the company is to cater to ever expanding electronic payment systems in the country and is currently in the process of rebranding itself as LankaPay.

A silent contributor to the national economy

Operating silently behind banking and financial institutions, LankaPay has shouldered a fair share towards the national development exercise by contributing to convert our cash-based economy into one that is cashless. This exercise has not been an easy task, which had also been accompanied by heavy investments by the company.

Cheques had traditionally been used to help push consumers towards banking. Introduction of this instrument helped to encourage the opening of bank accounts by a sizeable portion of the population, including the north and east, who are proving to be increasingly transacting via the same.

Incorporating the element of digitisation

In realising the nation’s vision of ensuring all segments of the population to have access to financial services and systems, LankaPay with the guidance of the Central Bank of Sri Lanka (CBSL) launched the Common ATM Switch in 2013 to revolutionise ATM based services in the county. The facility to inter-connect ATMs of banks was initially enabled only by international vendors, which was subsequently taken up by LankaPay to help significantly reduce the transaction costs. de Silva also noted that the company is striving hard to further bring down these costs.

This high-tech solution helped to bring financial institutions onto one single ATM platform, allowing the general public to have affordable and secure access to 2,650+ ATMs that are spread all over the country. The system essentially allows a ‘common’ usage of the ATM facilities, deployed by individual institutions, by the customers of all banks creating a high level of convenience and cost saving.

LankaPay reached another key milestone in the sphere of retail electronic payments with the introduction of Sri Lanka Interbank Payment System (SLIPS). The facility put Sri Lanka under fresh spotlight as it became the first country in South Asia to enable same day retail electronic fund transfer facility.

Moving a step further, LankaPay went live with the Common Electronic Fund Transfer Switch (CEFTS) allowing real time payments, which ensures the recipient would receive the funds instantaneously. 

Standing tall amongst regional peers

Despite some of the initiatives have gone live only recently, LankaPay is proudly standing tall among its peers in the region. 

“If you compare us with the South Asia region, we certainly are far ahead than some of the countries simply because we have more services on offer. Although there is room for further services to be offered, we are on par even with countries such as Singapore on certain aspects. Even though the usage of some of the new services are yet to reach high proportions, we have implemented a state-of-the-art and secure technology backend. Our current priority is to ensure the rapid adoption of our services by the masses via banks and financial institutes,” he said, confidently.

Challenges in moving ahead

According to de Silva, challenges are largely in the area of technology adoption. Looking at the country as a whole, the uptake of technology by the general public had been much slower than anticipated. While Sri Lanka enjoys more than 100% mobile penetration (22 million+), the increase in the usage of data enabled smart phones would help drive more transactions to be carried out via mobile devices. The current smart phone penetration is estimated to be around 20% of the total mobile phones in the market.

The next significant challenge is the lack of user-friendliness of the current applications and technology that is available in the market. With applications remaining complex and cumbersome to use, customers are less inclined to use such channels for financial transactions.  Payments via online platforms are yet to cross even the 1% mark.

To convert at least a portion of the remaining transaction volume, the industry has to ensure that the technology out there is simple to use in order to reach the general public. The masses should not be afraid to use technology towards making payments, hence, it is essential to provide solutions that are just a couple of clicks away.

“We do not have a lot of technology and applications out there that are simplified to be used by the common man. There is also a lack of applications that can be operated in local languages, which is also a big hindrance. Unless the application and instruments are made extremely easy to use and operate, people will not switch from the use of cash,” stated de Silva, while pointing out the importance of the applications being enabled in the national languages.

The other important challenge that needs to be further addressed is reducing the cost of transactions. Urgent measures have to be in place to ensure it remains at low levels especially for low value transactions so that the masses will not have any hesitation of using technology. 

“If the transaction costs are too high, people will just remain to be using cash. Quite often we come across instances where when you try to use your debit or credit card in rural areas, some of the merchants try to charge an additional 3% transaction charge, which itself is a deterrent of using those instruments. The industry collectively needs to look at bringing down the transaction cost so that the people will not think twice in getting on board. We need to think seriously in terms of increasing the volume of transactions by many folds rather than depend on a few high value transactions,” professed de Silva.

Room for improvement

Banks and financial institutions must be further innovative and creative in their thinking when conceptualising products. 

“They must think out-of-the-box in providing ways and means in which consumers can make and receive payments. Unless they do that, regardless of the solution being offered, it will not be widely adopted by the masses. Innovation is essential in terms making high-tech applications extremely simple to use without compromising on security. The common man should be able to use them to pay for groceries, vegetables, medicine and also public transport without any hassle by ideally using his mobile.  That is the simplicity required if we are to achieve mass-scale adoption,” asserted de Silva.

FT Profile: LankaClear

​LankaClear was incorporated in 2002 as the ‘National Cheque Clearing House’. Today it has grown to become the ‘Trusted National Payment Network’ for the country and rebranded itself as LankaPay.

The institution is owned by the Central Bank of Sri Lanka (CBSL) and all Licensed Commercial Banks operating in Sri Lanka. It boasts of multiple payment solutions offered via banks and financial institutes and provides solutions across all industries that are ready and willing to adopt and integrate to the latest digital technology platform driving Sri Lanka towards an efficient, green and paperless nation.

For the financial year 2014/2015, LankaClear recorded a 12% growth in revenue surpassing the Rs. 500 million revenue mark and recording a top line of Rs. 518 million. The revenue, which is the highest ever posted, was driven by growth in electronic transactions across all LankaClear electronic payment products. 

The company recorded a decent PBT of Rs.183 million and a PAT of Rs. 129 million with a net profit ratio of 25%.