Q: What is LankaClear’s vision for the Sri Lankan marketplace?
A: With its aspiration to have a positive impact on the economy, LankaClear’s primary focus is on addressing issues that restrain the market’s growth and development. The end goal is to improve the country’s performance in the Ease of Doing Business Index.

The Central Bank of Sri Lanka’s (CBSL) payments bulletin indicates that the currency in circulation recorded during the first quarter of this year was Rs. 900 billion. LankaClear estimates that the government incurs a cost of approximately 1.5 percent of GDP to maintain cash in circulation – i.e. for printing, distribution, cleaning, recycling, providing security and so on.

Using cash as a transactional medium is a waste of valuable resources, in my opinion. The country could save approximately 0.5 percent of its GDP by converting 30 percent of cash transactions to a digital medium. These savings could be used to disburse welfare payments to citizens or any other activities that benefit society.

The main objective of LankaClear is to encourage Sri Lankans to move away from the use of cash by driving them towards becoming a cashless society. We took note of the prevailing payment modes in the market and realised that there are myriad options to conduct transactions.

Electronic payments in the form of debit and credit cards are popular among nearly every community. International players have capitalised on this demand and introduced their solutions to the local consumer base.

The involvement of international schemes acts as a caveat for the local economy as it leads to the outflow of foreign exchange from the country that could otherwise benefit domestic transactions.

Q: And what measures has the organisation taken to reduce the outflow of foreign exchange?
A: We have set up local infrastructure to help retain domestic transactions in the country. In our estimation, these efforts are likely to save more than six billion rupees in foreign exchange a year.

Statistics have shown that 81 percent of Sri Lanka’s population resides in rural areas. A fundamental complication faced by these residents is their limited financial literacy. Despite operating bank accounts, their direct interactions with banks are negligible.

It is estimated that more than 95 percent of transactions in Sri Lanka are conducted by cash. The substantial amount of cash in circulation suggests to us that a majority prefer to keep cash on hand rather than depositing it in bank accounts.

The lack of money deposited in bank accounts serves as a deterrent to banks when determining the creditworthiness of individuals to grant loan facilities. The absence of a means to evaluate a person’s earnings, expenditure and propensity to repay debts diminishes financial institutions’ power to extend credit – especially to small businesses.

Given this scenario, the inability to obtain bank loans forces people to seek credit through alternative channels such as informal moneylenders levying higher interest rates.

Engaging in digital transactions opens multiple horizons of possibilities since they are automatically recorded by banks. Transactions in banks enable these financial institutions to assess the creditworthiness of people to offer loans at reasonable rates.

Based on statistics from the International Telecommunication Union (ITU) and other sources, LankaClear has gathered that Sri Lanka’s internet users amount to about 51 percent of the population, of which 37 percent use smart mobile devices to access social media.

The country has a mobile connection penetration rate of approximately 142 percent and over 50 percent of this relates to smartphone users.

Additionally, we have found that 65 percent of ATM transactions are carried out by using Sinhala and Tamil menus. This provides insights into society’s technology use patterns and preferences when conducting financial transactions.

Regardless of this fact, a majority of retail transactions remain cash-based.

To this end, LankaClear has been encouraging Sri Lankans to come on board with digital transactions, and use domestic payment channels to minimise foreign exchange outflows and reap the benefits of the seeds that the financial services industry has sown.

Q: So how has LankaClear contributed to the creation of a convenient payment ecosystem?
A: Islandwide coverage is essential to deriving optimal results based on population statistics. Concentrating our efforts solely on the Western Province does not address the overarching dilemma in its entirety.

LankaClear has introduced two modes of payments to streamline payment processes carried out throughout the country with a particular focus on targeting rural areas that lack sufficient access to financial services.

CBSL statistics indicate that banks issued more than 23 million debit cards in 2019. The number of POS terminals used by retailers has grown to nearly 87,000 over the past two decades. However, a majority of these terminals remain relatively unused with the overall average number of daily transactions amounting to less than four for each terminal.

Merchants need to spend to instal terminals to carry out card-based transactions. In addition, they incur costs between three percent and 3.5 percent of the value of transactions due to bank commissions to execute them. LankaClear intends to solve these strenuous issues.

JustPay is a payment mode that enables customers to make online payments regardless of where they are located, connecting users’ mobile apps to financial institutions. A person can make payments remotely in real time with extreme simplicity and security.

A customer with any bank account merely needs to own a smartphone and have a payment app to enjoy the benefits offered by JustPay. The retailer and customer receive SMS notifications, once the funds are debited and transferred to the recipient’s account.

LankaQR is another solution that we introduced to address payments on premises. It essentially removes the need for POS terminals from the payment equation. A user simply needs to scan a QR code and type the amount to transfer the money to the merchant’s bank account.

JustPay witnessed exponential growth during the year by catering to online payments. Nearly 825,000 transactions were recorded during the month of July at a total value exceeding Rs. 3 billion. We believe that these results indicate massive potential for this payment mode where retail payments are concerned.

LankaQR faced certain obstacles over the past year due to the imposition of ‘travel restrictions,’ which impeded customers’ ability to visit stores and conduct transactions. However, the LankaQR merchant base has grown to almost 250,000 in the past 18 months, which is nearly triple the number of POS terminals deployed over two decades.

Consequently, we have created the necessary payment ecosystem, and remain hopeful that the horizon will clear up once the lockdowns and travel restrictions are eased.

Q: What would you say is LankaClear’s role in the ongoing Industry 4.0 revolution?
A: LankaClear has implemented several solutions to equip individuals and businesses with the critical payment infrastructure, in order to facilitate a positive change in how the public and private sectors conduct business.

Sri Lanka is ranked 99th in the Ease of Doing Business Index for 2020. Favourable placement in this index is an attribute considered by investors when making decisions with regard to investing in a country. Sri Lanka simply needs to climb the ladder to attract the sought after foreign direct investment (FDI).

LankaClear has introduced solutions to improve the efficiency of carrying out import and export businesses to improve our ranking. Our focus was on enhancing traders’ and merchants’ public sector engagement when conducting business.

Sri Lanka Customs offers a 24×7 service year-round. However, financial institutions only operate until 3 p.m. on weekdays and as a result, making payments to clear goods after these operating hours during the week or over the weekend was nearly impossible.

In 2017, LankaClear introduced a system that enabled traders to log in to their online banking facilities and use customs declaration numbers to make payments 24×7. The system automatically connects traders’ banking facilities to the Sri Lanka Customs system through LankaClear and enables real-time payments any day of the week.

This payment information is updated in the customs database in real time and receipt numbers are sent to customers’ internet banking portals. These receipt numbers can be used to clear goods even over the weekend. The system processed nearly 15 billion rupees’ worth of transactions in July.

The Board of Investment of Sri Lanka (BOI), Sri Lanka Ports Authority (SLPA), Inland Revenue Department (IRD), Sri Lanka Standards Institution (SLSI) and Employees’ Provident Fund (EPF) have also ensured that their payments infrastructures are automated.

Furthermore, LankaClear has taken the initiative to automate the document submission process between importers and exporters, and government departments. Traders need to submit these documents to Sri Lanka Customs, the BOI, SLPA, and the Department of Imports and Exports Control, to conduct their business activities.

Moreover, LankaClear operates Sri Lanka’s only digital certificate authority – i.e. LankaSign. The certificates issued by the certification service provider can be used to digitally sign any electronic document prior to submitting it to government departments.

Digital signatures attached to electronic documents cannot be forged or modified. Any attempt to alter documents or signatures will automatically invalidate the documents.

The Electronic Transactions Act enacted in 2006 and its subsequent amendment in 2017 provide legal validity to digital signatures when it comes to acceptance in a court of law.

The government also issued a directive to Sri Lanka Customs to only accept electronic documents that are digitally signed from 1 August. And the department has partnered with LankaSign to provide digital signatures to traders who need to submit documents to it.

Presently, LankaClear is working on the process of introducing prepaid cards to enable passengers to make digital payments for public transport. Commuters can obtain plastic or virtual cards and use near-field communication (NFC) technology to make payments.

INTERVIEWEE DETAILS
Channa de Silva
General Manager
CEO
COMPANY DETAILS
Telephone:2356900
Email:helpdesk@lankaclear.com
Website:www.lankaclear.com