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Sri Lanka central bank in low cost QR code drive to boost digital transactions

ECONOMYNEXT – Sri Lanka is promoting low cost quick response (QR) code based technology with slashed fees to draw a wider base of small businesses and rural customers into digital transactions with credit cards costs keeping away the less affluent, Central Bank officials said.

Sri Lanka’s banks have also issued has 23 million debit cards but they are not being widely used in making payments, Deputy Governor H A Karunaratne said.

The average use of debit cards was about 5 percent and females were 3 percent.

Debit cards were mostly used to withdraw cash from teller machines and not to pay at point of sale machines (POS) at shops, which are also not found at only larger establishments.

“POS machines cost around 65,000 rupees partly due to taxes, and there were fees 2,500 rupees upwards a month, which made it prohibitive for small business in rural areas,” D Kumaratunga, Director of the Payments and Settlements Department of the Central Bank said.

“Banks charge this additional monthly fee from vendors based on the volume of transactions.”

Low Cost Extension

QR code used payment systems would be cheaper for the small businessmen who cannot afford a POS terminal.

Banks typically charge about 3 percent for credit card payments (a credit card purchase is made through a loan to the customer, with the cost being borne by the merchant and not his/her own money).

“However, QR code surcharge is about one percent,” Kumaratunga said.





The central bank has proposed that in 2020, which has been declared the year for digital transactions, the QR code fee be brought down to 0.5 percent.

Central bank has also proposed that no charges will be taken for utility bill payments and payments to government institutions within the year for digital transactions.

“The idea is to bring in more merchants and customers,” R A Jayalath, Assistant Governor of central bank said.

“They may have losses in the beginning but after they onboard enough customers and increase volume they will earn revenue and cover the costs.”

The central bank has taken actions through commercial banks and financial institutions to push interoperability.


LankaClear, Sri Lanka’s central clearing house and the regulator is promoting a common QR system called LankaQR.

The LankaPay QR code had been adopted by four banks, Bank of Ceylon, HNB, Commercial Bank and Cargills Bank.

Chief Executive of Cargills, Rajendra Theagarajah said ‘bi-lateral’ QR codes which lack interoperability limited the wider use of QR by confining transactions to customers of one bank.

“We need to make it multilateral and only then will we be able to truly enable even a fruit seller’s access to the digital payments market,” Theagarajah said.

“Banks need to work with LankaClear to make use of those tools.”

Central bank officials said it was taking some time for banks that were using their own QR to move to the Lanka QR system, due to operational issues.

Bank of Ceylon for example already had over 10,000 merchants and needs time to migrate their QR code to Lanka QR, Kumaratunge said.

Theagarajah said it was costly to individually sign up merchants and the real growth would happen when users could sign up on their own. Data costs were also a barrier he said.

“This is a challenge since internet connection facilities in rural areas are expensive,” he said.

“This cost issue should be addressed in order to increase digital payment penetration in these areas.”(Colombo/Mar11/2020)

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