Importance Of National Payment Platform- How Sri Lanka Can Transform To Cashless Economy
By Chamikara Sapuge
Sri Lanka does not have National Payment Platform. We are talking about it since 2015 but haven’t made a progress about the matter .Our Fintech and E- Commerce startups will flourish if we have a National Payment Platform and move into cashless economy. Paper money is disappearing across the world from Sweden, China and India. If the National Payment Platform comes to play people will use more digital money and move to cashless economy.
National Payment Platform -NPP
A payment platform is an essential piece of infrastructure for e- commerce and Fintech .In a digital economy where buyer’s meets sellers, customers meet supplier’s online. NPP would give consumers, businesses and government a platform to make fast, secure, versatile request for payments 24/7. A NPP can deliver secure payment request message to respective financial institution real time, allowing financial institution to clear and settle payment solution for two parties or many. It can simplify payments, as well as offers the ability to include more information with payments, such as text or links to externally hosted documents.
How its work
The digital payment applications would take your details like your name and credit card information. Once it has collected this data, it would utilize the NPP core platform to send it to the payment gateways belonging to the relevant bank. Once the bank has received this between the relevant accounts accordingly. Information, its systems would transfer the money.
Lanka Clear Role In NPP
Lanka Clear is the “National Cheque Clearing House “In Sri Lanka. This is own by CBSL and Licensed Commercial Banks in Sri Lanka. They operate several services for Sri Lanka Financial Institution. Even though lankaclear has number of services under its umbrella we would talk one particular service. That is “LankaPay Common Electronic Fund Transfer Switch “or known as CEFTS.
LankaPay Common Electronic Fund Transfer Switch (CEFTS)
Since Sri Lanka does not have NPP, the closes thing we have to NPP is CEFTS. This is real time money transfer facility only available for registered members of Lanka Clear. The CEFTS is an internal part of Sri Lanka lankapay payment system.
The CEFTS is supporting on-line real time fund transfer/ payments between Lankapay- CEFTS Members to enable bank customers to initiate transaction any given time of the day to make payment through ATM , Mobile phones, Internet .Even During non banking hours.
CEFTS currently has 31 financial institutions as participants.
Recently Lankaclear and CEFTS launch its payment app “ Justpay “ which is excellent initiative. LankaPay Common Electronic Fund Transfer (CEFTS) to facilitate secure real-time retail payments below Rs.10,000 under an extremely low tariff scheme. Accordingly, JustPay will enable customers to make everyday payments by using their Savings or Current account by using smart mobile phones and other smart devices.
Benefits Of Cashless Economy.
1 Bring Down Transaction Cost
Though transaction cost is not visible in cash transaction but there is a substantial burden of cost borne by the government. Printing of currency, managing money, moving cash around, and other efforts are taken by the government to make currency available to the citizens. Through the online transaction, the economy is not only benefitted with smooth transactions but also it saves lots of government’s money. Sri Lanka NPP could help millions of payment going to international companies like Visa and Master.
2 Curb on Black Money
All illegal and unethical transactions are made through cash and maximum times, this cash is black money. Economic transactions through digital means will be recorded and make it impossible for people to generate illegal cash. Digital means of transaction will not only put restrictions on the usage of black money but also stop criminal offenses done through it.
3 Convenience for People
Payments through digital means are much faster. It is more convenient to carry a digital device or plastic card rather than cash. These are safer and protected. Smart phone users have increased in numbers nowadays. All matters of economic transactions can be easily dealt with e-wallet, mobile banking, or mobile apps using your Smartphone. According to Dialog Telecom from 11.8 Mn dialog subscription 44 % were using Smartphone.
It is simple to manage and handle a single device. The risk of carrying heavy cash for long vacations is eliminated out through the use of digital means for transaction. Biggest advantage of a cashless economy is in eliminating corruption.
4 Increases Government revenue & Enhance Tax Compliance
A cashless economy will surely increase the revenue of the government. Every single transaction goes on record. Probably, this will enhance tax compliance and increase tax base. With the increase in revenues, the government will be able to spend more on people welfare programs. People do not have to manage cash book or tally balances when they using digital means to transact
Central Bank or other Sri Lankan banks does not help much when it comes to fintech or e – commerce. It takes hundreds of thousands of rupees to setup a payment gateway. Our CBSL doesn’t not allow fintech companies to hold customer data ( pickme and payhere has the option after years of lobbying).
Even India and China has more market favorable regulation in this area. Companies like Ant Financial and Paytm changing the boundaries of digital money. Ant Financial has now world biggest “Money Market Fund “worth of $ 240 Bn.
If the NPP comes to play our startups doesn’t need to go through these problems. Launching the “ Justpay “ is good initiative but country needs more define policy for this and backing of government , regulators and all other financial institution of Sri Lanka. India has given various incentives for use digital money.
If we can simply convert our savings account or current account to e- wallet and use NPP as back end for payments we can transform Sri Lanka into cashless economy.
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