Sri Lanka’s digital payment landscape is lagging behind, and Dr. Roshan Perera, a former Central Bank Director, believes India holds the key to catching up. Dr. Perera suggests Sri Lanka should actively seek India’s assistance in revamping its digital payment ecosystem to mimic the success story of India’s system.
Sri Lanka launched LankaQR over three years ago, boasting 350,000 merchants. However, daily transactions through these QR codes remain alarmingly low. Dr. Perera spoke at a recent Advocata event titled “Closing the Divide Through Women’s Access to Finance,” highlighting the bafflingly low usage of LankaQR.
She expressed hope that India’s recent connection with LankaQR will reignite efforts to promote digital payments and encourage Sri Lankans to embrace them. India’s success hinges on a unified payment interface, fostering competition among multiple financial service companies. This has resulted in a thriving digital marketplace for payment providers.
The Reserve Bank of India has spearheaded this digitalization effort, enabling swift bank openings for a vast rural population, facilitated by the Aadhar identification system. Dr. Perera emphasizes that India stands as a prime example for Sri Lanka.
Sri Lanka’s current woes can be attributed to the high costs associated with dominant bank-backed payment gateways. These entities collaborate to maintain high merchant fees, hindering a competitive digital payment provider marketplace. This discourages larger merchants, concerned about compliance, from adopting LankaQR, as the cost cannot be passed on to customers. Furthermore, Sri Lanka’s reward schemes heavily incentivize card usage, further dampening the adoption of alternative digital payment methods.
Dr. Perera believes the Central Bank has a role to play. They should intervene and allow businesses to pass on transaction costs to consumers. Cash management incurs storage and lost interest costs, making LankaQR a cheaper option for businesses, contingent on a significant rise in user base.
The discussion also touched upon Sri Lanka’s underbanked female population. With a limited ability to access credit due to a lack of physical assets, digital payments offer a solution. Dr. Perera emphasizes that India’s UPI system has revolutionized the number of transactions. Transaction history data can be leveraged to build creditworthiness for women, allowing for more informed lending decisions. By embracing digital payments and learning from India’s success, Sri Lanka can empower women and propel them towards greater economic participation.