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Thursday May 23rd, 2024

LankaPay Spearheads the Corporate Digital Evolution

R-L: Channa De Silva – Chief Executive Officer of LankaPay; and Dinuka Perera – Deputy Chief Executive Officer of LankaPay

LankaPay’s Channa de Silva, Chief Executive Officer, and Dinuka Perera, Deputy Chief Executive Officer, share insights into the evolution of the national digital payment ecosystem, emphasizing the role of many innovations in facilitating digital transactions. One of the key payment modes, JustPay addresses the needs of both individuals and corporate entities by offering versatile solutions such as on-delivery payments and streamlined bill payments. The introduction of PayMe further enhances convenience by enabling a secure messaging platform for payment requests, benefiting both businesses and individuals. Additionally, initiatives like Government Payments, digital signatures and the National Card Scheme underscore LankaPay’s commitment to providing reliable, secure, and efficient payment solutions for all.

Reflecting on your career trajectory you have been involved in the transformation of the payment system and LankaPay. You have intimately witnessed that evolution. LankaPay today offers 16 diverse products spanning all stakeholders in the national digital payment network, can you take us through that journey?  

De Silva: When I joined around the end of 2015, approximately eight years ago, we primarily focused on tasks like cheque clearance and managing the common ATM switch. These activities mainly dealt with cheque and cash transactions. Additionally, we were handling slips for bulk payments, as CEFTS or Realtime Payments had just started rolling out.

However, what we came to realize was the importance of understanding market needs and transitioning people towards more convenient transaction methods. We had to explore various options and the correct use cases to identify gaps in the market.

Over the past 8 years, we’ve analysed different scenarios and use cases to pinpoint areas where transactions were not convenient. We then devised solutions to address these gaps, ultimately making the payment ecosystem more seamless and customer-friendly.

The premise was clear: to encourage people to transition from cash to digital transactions, the process had to be simpler than using cash and achieving this required behavioural change, which we pursued through innovative solutions aimed at enhancing convenience and user experience.

Most of our innovations and solutions have been developed to address various gaps in the market, aiming to streamline the entire ecosystem and ensure that people find digital transactions more convenient than cash. This involved linking all key participants in the ecosystem and prioritizing convenience for everyone involved.

Channa De Silva – Chief Executive Officer of LankaPay

We usually associate payment system use cases with individuals, the convenience and cash-less factor. But are there corporate use cases? Is building payment networks for the corporate sector more complex and challenging?

De Silva: Absolutely, one of the most significant tasks at hand is to enhance the convenience of payment networks for everyone, particularly in the corporate sector aiming to streamline the ease of doing business, especially for exporters and importers. They faced several challenges, notably conducting transactions, particularly for large payments such as customs and tax payments, which were predominantly done using cash or pay orders requiring physical visits to banks.

These transactions were further constrained by limited operating hours, ending at 3 p.m. on weekdays, with banks closed on weekends and bank holidays. To address these limitations, we had to devise a solution enabling individuals to conduct transactions remotely, whether from home, office, or any location, at any time, even on weekends. This necessitated the introduction of a seamless system that facilitated faster, simpler, and secure transactions, ensuring continuous operations, especially for key tasks like customs clearance.

In enhancing the ease of doing business and making transactions seamless, we explored various solutions, extending beyond tax payments to other financial transactions. Additionally, amidst the challenges posed by the COVID-19 pandemic, we observed a shift away from paper cheques, prompting the need for alternative methods. Leveraging existing infrastructure, including digital payment rails, enabled corporates to transition smoothly to remote work environments, facilitating uninterrupted business operations.

In a corporate setting, convenience is essential, but so is the establishment of processes. Without proper processes to support the changes you’re implementing, organizational transformation can’t fully take root. Would you agree that fostering a cultural shift is integral to this endeavour?

Perera: The word “convenience” consistently emerges when discussing our transformative journey. It’s crucial to understand that in every product we develop, our primary focus is on maximizing convenience. Our vision emphasizes saving people’s valuable time in everything we undertake. This serves as the guiding principle behind our conceptualization process, ensuring that we prioritize convenience for citizens and corporate entities alike.

Regarding your question about corporates transitioning from traditional methods like cheque writing or cash payments to online processes, it involves significant process changes within their organizations. As for our journey, we originated as a cheque-clearing organization, necessitating a shift in mindset and training for our staff to develop products aligned with our vision. This journey has propelled us towards a more digitally oriented operation.

Despite maintaining a staff strength of just over 100 individuals, we’ve undergone substantial internal process changes to accommodate this shift, transitioning from a cheque-clearing operation to one focused on digital transactions.

About processes, especially concerning government payments, it’s important to consider that payments are only just one component of the entire ecosystem. Preceding a payment, there are invoicing, purchase orders, and various documentation involved. Simply digitizing payments while leaving other aspects manual doesn’t improve the ease of doing business. This is where we automated the entire document process chain through digital signatures.

By digitizing all documents and automating payment processes, we achieve a comprehensive, 360-degree view of the entire process. Digitizing the entire ecosystem ensures seamless integration. Otherwise, addressing only one or two components piecemeal doesn’t create the desired outcome. It’s essential to complete the entire cycle digitally to prevent potential breakdowns that may lead people to revert to manual methods. Without a fully digital experience, leaving even one or two manual steps will disrupt the seamless flow that should be achieved.

Dinuka Perera – Deputy Chief Executive Officer of LankaPay

Could you provide a brief overview of JustPay in the context of the corporate environment, and do JustPay’s latest innovations help businesses intersect with this ecosystem?

De Silva: The whole concept of JustPay was to transition low-value transactions from cash to digital. Previously, 100% of these transactions were conducted in cash. Our objective was to digitalize even the smallest transactions, such as mobile reloads worth 100 or 200 rupees. We identified that smartphones are widely prevalent, with approximately 67% to 68% smartphone penetration compared to the population.

To achieve this, JustPay focused on providing customers with choice. Previously, customers were limited to their bank’s internet or mobile banking platforms. However, we realized the importance of offering options to prevent customers from reverting to cash payments. Therefore, we connected various apps and browser-based interfaces to a unified system, allowing customers to choose any digital payment app/solution available in the market and link it to their bank account.

This approach leveraged the fact that there are more bank accounts in the country than the population, providing consumers with the freedom to select their preferred payment method based on their requirements. Additionally, we introduced JustPay Web to enable payments through e-commerce sites and corporate portals, expanding the digital payment ecosystem beyond mobile payment apps.

This innovation not only provided consumers with more payment options but also simplified fund transfers between different bank accounts, eliminating the need to install and switch between multiple apps. Overall, JustPay has significantly contributed to digitalizing the economy and enhancing convenience for users.

You have another solution, PayMe. How does PayMe differ from JustPay, and what specific opportunity did you identify with PayMe that JustPay couldn’t address?

De Silva: PayMe aims to address a unique gap in the market. It’s essentially a secure messaging platform. What we discovered through market research is that a significant portion, around 65 to 68%, of people opt for cash on delivery when ordering online from e-commerce sites. This choice stems from uncertainty regarding the delivery process, including concerns about the quality of goods or whether they will receive them at all after making payment.

However, this method poses challenges, especially when the delivery arrives unexpectedly while the customer is away from home. This gap in the market prompted us to consider implementing a JustPay on-delivery system. The idea is simple: when the delivery person arrives, the consumer receives an in-app message sent via a payment link in whatever app/solution he/she uses. Regardless of their location, they can click on the in-app message to make the payment instantly.

This approach ensures that payment is made upon delivery, assuring the consumer while allowing them to inspect the goods before completing the transaction. It’s a convenient option that bridges the gap between online ordering and payment, enhancing the overall customer experience.

What are the other use cases of PayMe?

Perera: In terms of making this service available not just for e-commerce, but also for utility bills PayMe offers a convenient solution. When we receive reminders about pending bills, such as electricity or mobile phone bills, PayMe allows us to quickly and easily make payments via in-app messages. For corporates, it provides a streamlined method for collecting recurrent payments. Unlike static messages, PayMe messages are dynamic, allowing consumers to open the message and make payments promptly.

Previously, bill reminders were sent via SMS, but with PayMe, they come as in-app messages, enabling instant payment with just a click. This seamless process enhances payment collection and convenience for both consumers and businesses. PayMe is not limited to the corporate sector; individuals can also use it to request and receive payments from others, such as plumbers or electricians, making it versatile and inclusive.

PayMe brings together various apps/solutions and consumers, automating payment requests and transactions. Unlike traditional SMS reminders, PayMe messages are more interactive and action-oriented, encouraging immediate action. This feature increases convenience and encourages greater adoption of technology.

Contrasting PayMe with JustPay, PayMe functions as a smart message for sending payment requests, while JustPay serves as a straightforward payment option using bank accounts. Unlike previous options that required using the same company’s app, PayMe is app-independent and interoperable, providing consumers with the freedom to use any app they prefer for receiving and making payments. This flexibility makes PayMe ideal for recurrent payments across various banking and service provider apps.

The role of corporates within the ecosystem is pivotal, especially considering their complexity compared to individual users. A crucial aspect involves ensuring seamless interactions between businesses and the government, particularly regarding payments. Could you elaborate on how LankaPay’s government payment platforms facilitate this connection, linking companies or individuals with government services?

De Silva: The main issue was the inconvenience people faced when making payments to government departments. Previously, it involved queuing up or physically obtaining an invoice and navigating through various counters. The requirement was to facilitate payments to any government department at any time, addressing the needs of both consumers and citizens.

One significant challenge was encountered with certain departments where the payment amount could vary based on the time of the day, such as customs duties that fluctuate depending on the time. It was crucial to ensure that payments were made accurately to avoid complications with refunds.

For these departments, direct linkage to their systems was necessary to provide real-time payment information to consumers via various banking or fintech apps. However, for the majority of government departments, approximately 95 to 98%, lacking sophisticated systems and relying on manual processes or Excel sheets, a solution was required to enable convenient payments based on received manual invoices.

This led to the development of a bridge allowing consumers to make payments even in the absence of departmental systems. Rather than creating new systems for the government, we focused on connecting their existing processes to payment platforms. Even for departments without systems, we enabled citizens to make online payments based on received physical invoices, ensuring convenience and accessibility for all.

Perera: Just to add, in terms of corporates, let’s consider how they benefit. For instance, with Sri Lanka Customs, many corporate entities need to make payments digitally to clear goods. We facilitate this process via digital payments and also various tax payments such as income taxes, withholding tax, and VAT. By connecting to the Asycuda System of Customs and RAMIS system of the Inland Revenue Department, corporates can make customs and tax payments through the corporate portals offered by their bank.

Similarly, we work with other organizations like the Department of Commerce to expand our platform, known as the LankaPay Goverment Payment Platform. This integration not only enhances the ease of doing business index but also serves as a bridge between government organizations and payment processing, contributing to our country’s overall improvement in the ease of doing business.

Consider the case of income tax payments with deadlines, such as May 15th. Through the online payment option, tax payments can be made until 11:59 p.m. of the due date, offering convenience that traditional counter payments cannot match, especially for corporates. Aligning with our vision, we strive to make transactions easier and more convenient for both individuals and corporate entities alike.

De Silva: And also, we’ve taken an additional step forward. Let’s consider Customs as an example. While we’ve automated the payment system, what about the stack of documents that traders must submit for clearance of goods? To address this, we’ve introduced digital signatures. Now, whether it’s a corporate entity or a trader, they can digitally sign all necessary documents and upload them directly to the Asycuda system. Following this, the payment process can also be initiated digitally, automating the entire chain.

Without this automation, despite making digital payments, individuals would still need to physically carry a pile of documents to customs. We’ve eliminated this requirement. However, for a meaningful impact on the ease of doing business, this automation must extend to all other trade-related government departments. Conducting trade involves multiple other departments, including BOI and Ports, Import Export Control, SLSI, among others. Without automating these processes across the board, the desired impact won’t be achieved. While we’ve initiated this process with Customs and a few others, it’s essential to roll it out to all related departments as well.

Can you explain to us about e-signatures and digital signatures? 

De Silva: Essentially, an electronic signature involves scanning your actual physical signature from a document and attaching it to an electronic document. The issue with this method is its susceptibility to manipulation; someone could easily insert another person’s signature or alter the document after electronically applying the signature, compromising its security.

In contrast, a digital signature utilizes technology to prevent tampering with the document after putting the signature. Even if alterations are attempted, the recipient would be alerted of any changes made after the signature was applied. Additionally, the digital signature is uniquely bound to the individual who applied it, ensuring accountability. This technological binding prevents individuals from disavowing their signatures, unlike with electronic signatures, where such claims can be made.

In terms of legal validity, digital signatures offer greater assurance. It would be challenging to contest the authenticity of a digitally signed document in a court of law, unlike electronic signatures, which lack the same level of verifiability. With digital signatures, any modifications to the document or signature are visible in electronic form, providing enhanced security and verifiability, making them more robust and reliable for most documents including contracts and legal agreements.

Introducing digital signatures also necessitated building an ecosystem around it, correct? It’s not simply a matter of opting for a digital signature and considering the task complete. How did you navigate the process of establishing this ecosystem?

Perera: It was initially a challenge to inform people about the process of digitally signing documents and the required infrastructure. Our first step was to raise awareness. We engaged legal experts to conduct webinars aimed at both the government and private sectors, emphasizing that digital signatures hold the same legal validity as traditional wet signatures or electronic signatures. The Electronic Transactions Act of Sri Lanka explicitly supports the legal acceptance of electronic signatures.

From a technological standpoint, obtaining a digital signature stored in a hard token and using it for digital signing is relatively straightforward. However, we needed to ensure users were aware of and comfortable with this method.

A significant turning point occurred during the COVID lockdown when the Secretary to the President issued a circular to all government organizations, urging them to adopt electronic and digital signatures. This highlighted the value of digital signatures, especially during times when the physical signing of documents was impractical. Despite initial challenges, we’ve observed a growing acceptance and familiarity with digital signatures, even within the banking sector.

However, one challenge we encountered, particularly before COVID, was the process of issuing digital signatures to individuals.

De Silva: We needed to verify the authenticity of each individual to ensure that the digital signature issued belonged to a legitimate and valid user. This process involved international authentication procedures to validate the identity of the person. Previously, this validation process was manual, but the onset of COVID-19 necessitated automation.

Authenticating a person electronically presents challenges due to the prevalence of fraudsters. However, we developed a hybrid system combining digital and manual methods to streamline the issuance of digital signatures. This approach ensures that the digital signature is issued to the correct individual. Our organization undertook the responsibility of validating the authenticity of each person through a meticulous process to guarantee the legitimacy of the signature.

Perera: We’ve made advancements to accommodate requests, particularly from corporate entities, regarding the use of digital signatures. Many directors preferred the convenience of signing documents using their mobile phones, iPads, or other mobile devices, rather than relying on physical tokens connected to a PC.

As a solution, we introduced the soft token, offering the flexibility to digitally sign documents using mobile devices such as mobile phones or iPads. This option is now readily available to users, providing added convenience and accessibility.

We’re witnessing a rise in the prevalence of QR codes at merchant locations, a trend that wasn’t as prominent three years ago. They’re now appearing in increasingly unexpected places. Could you shed some light on LANKAQR and its role in this evolving landscape?

De Silva: When we implemented LANKAQR, there were already about two decades of card usage in the market. And with card usage, merchants require a point of sale (POS) terminal, which can be quite expensive. These terminals used to cost around 50,000 rupees, but due to exchange rate fluctuations, they now cost more than 100,000 rupees. For small-time merchants, especially in the SME sector, which contributes around 52% of GDP, affording these terminals was a challenge. As a result, many SMEs couldn’t accept electronic payments, even if customers had cards.

The rationale behind introducing LANKAQR was to provide a solution that was free or had minimal cost for merchants to get onboard, allowing them to accept electronic payments. The idea was simple: by placing a QR code sticker on a stand, merchants could accept payments without needing expensive POS terminals. Additionally, LANKAQR addressed the issue of cycle breakdown. For instance, consider a scenario where someone orders a ride through an app and pays electronically, but later needs to make a cash payment for daily groceries and needs to withdraw cash. This situation led to friction, as many small merchants preferred cash payments and were unable to accept digital payments.

By introducing LANKAQR, we aimed to integrate these micro-merchants into the payment ecosystem and prevent cycle breakdowns. Now, a three-wheeler driver can simply scan a QR code to make payments directly from their bank account, eliminating the need for cash transactions. This initiative not only streamlined payments for local micro-merchants but also appealed to tourists, particularly those from countries like India and China, who are accustomed to making QR payments. For tourists, using LANKAQR means they can make payments conveniently without relying on cards or cash, using familiar apps and channels with lower exchange conversion costs while ensuring that transactions remain legitimate and routed through formal banking channels.

Perera: Another unique feature of LANKAQR is its interoperability. By interoperability, we mean that previously, QR codes issued by specific organizations, such as telecom companies or banks, could only be scanned by their own respective mobile apps only. However, when the Central Bank introduced specifications to make it interoperable, users could scan the LANKAQR code and make payments regardless of the mobile app they were using. LankaQR follows the international EMVCo standard, which facilitates seamless interoperability.

This interoperability also enabled international integrations. For instance, we’ve integrated with India and China, allowing tourists from these countries to easily scan LANKAQR codes and make payments. This eliminates the need to replace LANKAQR codes with a QR code issued in India to accommodate Indian organizations seeking to facilitate payments for their citizens in Sri Lanka.

I believe the success of LANKAQR in the future will depend on its interoperability and the minimal changes required to maintain it. So, that’s the essence of LANKAQR’s uniqueness.

Are you seeing evidence that visitors from China and India are now beginning to use this? 

De Silva: Absolutely. Just a couple of months ago, in February, we integrated with NIPL facilitating QR payments for Indian tourists using UPI-enabled apps. We’ve noticed a significant increase in transactions without even conducting extensive publicity campaigns. And the same with users from China. These are just the initial stages.

Currently, a few Indian apps are responsible for the majority of transactions, and others are planning their implementations. For Indian users, this is a seamless extension of their day-to-day life. It eliminates the hassle of currency exchange and the associated costs due to multiple conversion fees, as they no longer need to convert from Indian rupees to dollars to Sri Lankan rupees.

As we move forward, we’re planning to onboard two more players from China: Alipay and WeChat. Once they join the ecosystem, we anticipate even greater usage. With nearly 400,000 merchants already on board, we anticipate more merchants will adopt LANKAQR codes for payments.

Something that again works for merchants is the national card scheme. How does this work for? What sort of efficiencies does this bring to the payment system from a merchant’s point of view?

De Silva: It’s more than just efficiency; it’s about adhering to the National Card Scheme that we’ve issued, which follows international standards. However, the primary benefit for merchants lies in the lower commission structure.

Traditionally, merchants have been charged transaction fees ranging from 2% to 3.5%, with some cases even reaching 8%. Particularly for small and medium-sized enterprises (SMEs), such high commissions are not acceptable. Therefore, the main advantage of our system for merchants is the reduced commission rate, set at just 1%.

This lower commission is not only beneficial to merchants but also there are significant cost savings for banks and other organizations within the ecosystem as well. Since all transactions are domestic, there is also no outflow of foreign exchange. This is a key advantage of our card scheme, as it operates entirely within the local financial infrastructure, with transactions occurring solely between local institutions.

Originally, we partnered with JCB for international acceptance of the National Card, allowing cardholders to utilize the JCB network when travelling abroad. However, for local transactions within Sri Lanka, our ecosystem operates independently of JCB. We are currently in the process of introducing one or two additional international card schemes into the ecosystem, providing consumers with better choices. Thus, we’re expanding our national card scheme to include more options for consumers, ensuring a robust and versatile payment ecosystem.

As CEO, your role involves envisioning the organization’s future beyond just the next six months. You must consider how the foundation you’re laying today will remain relevant in five years, anticipating the evolving ecosystem. What is your approach to strategy?

De Silva: Our transition from a national to an international organization presents significant challenges, especially in ensuring the reliability, availability, and security of financial transactions. When a consumer engages in a transaction, whether it’s daytime, midnight, or early morning, there’s no room for failure. The system must be infallible to avoid putting the consumer in jeopardy.

Our system is meticulously designed to minimize the possibility of failure. We have redundant primary sites, a disaster recovery site, and continuous data synchronization among them to ensure seamless operation. The network architecture is engineered to quickly switch to backup systems if a primary system fails. This level of redundancy is essential because our ecosystem is not confined to a single organization; it’s interoperable, national and international.

Reliability is paramount, followed closely by security. To maintain international standards, we have obtained various certifications and undergo rigorous testing, including regular penetration testing and vulnerability assessments. These efforts ensure that our systems remain secure against potential threats.

However, achieving 100% availability is a formidable challenge in technology, where downtime is not uncommon. Our goal is to make our systems resilient, capable of swiftly recovering from any downtime and ensuring uninterrupted service. Trust is fundamental in financial transactions, and a single failure can erode consumer confidence. Therefore, ensuring that our systems work flawlessly each time and every time is our primary challenge—one that we are committed to overcoming.

Perera: In terms of the challenges ahead, the payment landscape is constantly evolving. We need to assess what products and services our national organization can offer to our citizens. While we monitor the changing landscape and anticipate future technologies, we also focus on local relevance for the corporate sector and individual citizens. One of the significant challenges we anticipate is our transition to an international operation and collaboration with counterparts in other countries and international card schemes. Working with these organizations brings about differences in legal jurisdictions and advanced technological requirements. To address these challenges, we are developing technologies such as middleware to facilitate faster integration with many organizational systems. These technological advancements will be key in overcoming the challenges ahead.

De Silva: We will focus on what is most relevant to us in the next five years. One area of focus is facilitating international agreements, especially for corporate entities signing contracts across borders. While domestically issued digital signatures did suffice previously, international acceptance is crucial for such contracts. To achieve this, we have obtained Web Trust certification, ensuring that these signatures are recognized outside Sri Lanka. This addressed the evolving market requirements from both consumers and the corporate sector, driving us to innovate and stay ahead of the curve.

Our approach is to identify market gaps and address them through technology, which has been our mantra for success. We emphasize this to our internal teams, urging them to empathize with end-users and the difficult situations they encounter. For example, when faced with making a hospital bill payment, failure is not an option at the time of payment, as it directly affects the individual in difficulty. Therefore, our solutions must be not only convenient but also reliable and secure, ensuring seamless transactions every time.