The idea of a cashless future isn’t a novel one. Yet, as the Central Bank stated in its payments bulletin for Q2 of 2020 cash remains the popular mode for retail payments. When asked about the persistence of cash, Channa de Silva, the General Manager & CEO of LankaClear responded, “It’s too convenient. Today you can walk out of your house and find an ATM within walking distance. It’s a testament to the commendable networks built by the banking industry. Further, with LankaPay, it’s possible for customers to utilize any ATM. If we are to make cashless payments the norm, then it must be more convenient than using cash.”
The global pandemic is accelerating a shift towards a cashless future, raising new calculations for merchants and enriching the cashless payment industry. “We’re now living through an interesting social experiment that is forcing banks, businesses and consumers to rethink the way they operate and use cash,” says Channa. “We have a world in which there is less contact and in turn, less cash. People are forced to change their habits. No longer can they go to the closest ATM machine, they need to go online.” he said.
Building the infrastructure to replace cash
In recent times, LankaClear has been working towards building the infrastructure needed to enable seamless cashless payments. Key among them is JustPay, which shouldn’t be confused as an app but is actually a payment mode. With it, customers can utilize any fintech app of their choice to make cashless payments. Meanwhile, merchants can accept cashless payments without the steep commissions usually associated with such transactions.
JustPay serves as a digital backbone connecting the different fintech solutions in the market, serving a sizable portion of the population that has access to smartphones. However, it’s important to recognize that there still many others that do not. Hence, LankaClear introduced the Payment Exchange Name (PEN) system. This is a peer-to-peer fund transfer system. With nicknames attached to bank accounts, you only need a person’s mobile number and the nickname of their bank account to make transfers using PEN.
On top of these solutions, a number of other initiatives have sprung up to encourage cashless payments. Notably the LankaQR initiative by the Central Bank of Sri Lanka, which is a universal standard for QR code payments. Another initiative being explored is the use of smart messages to utilize SMS reminders as a means of paying your bills digitally.
Fintech for services to drive cashless payments
In the wake, several unique business models have emerged leveraging the flexibility offered by fintech startups. A notable example he shared was for mobile phone reloads. During the initial lockdown, LankaClear noticed several low-value deposits into a single account. Assuming it was fraudulent, an investigation was launched. What they’d found was an individual had started a business offering mobile phone reloads. “It’s interesting to see how people are utilizing these technologies,” commented Channa.
Another example he shared was of PickMe, which introduced food and medicine delivery and a host of other services. Given the need for social distancing, these services offered much-needed convenience. From these examples, Channa states that startups should explore services that offer convenience to their customers. “What’s the difference between 2 different payment apps? Maybe one of them is offering cash backs but that’s not sustainable. Instead, startups should look towards offering convenience to their customers. If the service is seamless, then they’ll have the push to make payments digitally.”
Enabling partnerships across the industry
However, for a fintech startup seeking to accept digital payments, the current regulations state that they must partner with a bank. By nature, startups are disruptors seeking constant progress. In contrast, banks are cautious and risk-averse as they’re responsible for safeguarding the money of their customers. It goes without saying that they’re complete opposites. Yet, practically anywhere in the world, such partnerships are necessary if a country wishes to progress in digital payments.
So how can such partnerships work smoothly in Sri Lanka? When asked about this, Channa pointed towards the introduction of JustPay. “Today, a fintech startup only needs to partner with the smallest bank and they’ll have access to the entire financial system. What we’ve observed is that some of the smallest banks are among the most aggressive in pushing digital banking and payments. In embracing fintech by these banks, we’ve observed instances of fruitful partnerships where startups are up and running in as little as 2 weeks”
Making cashless payments convenient
Despite trends across the world, cash still remains king in Sri Lanka. For digital payments to dethrone it, the answer is simple – it must be more convenient than cash. Rather than payment only apps, Channa argues it will be innovative startups offering technology-driven convenient services that will make it so. Hence, a cashless Sri Lanka is still years away. But, LankaClear he states is focused on building the infrastructure necessary for it. Ultimately, bringing about greater levels of financial inclusion where even the poorest and vulnerable members of society can access the financial services to build better lives.