Sri Lanka starts its own payment card to cut costs
ECONOMYNEXT – Sri Lanka has started a national payment card which will settle domestic and international transaction partnering with JCB International, which will lower costs, the central bank said.
The card system is run by Lanka Clear (Pvt) Ltd, Sri Lanka’s domestic checque and interbank payment clearing house.
International transactions will be cleared by JCB International of Japan.
The card scheme which meets international standards will "benefits to Sri Lankan consumers due to its lower cost that enables financial inclusion," Central Bank Governor Indrajit Coomaraswamy said.
The debit card will be followed by a credit card and an e-commerce transaction support system.
The debit card will be accepted across over 4,800 ATMs connected to the LankaPay network to withdraw cash.
MCB Bank is the first to issue a LankaPay-JCB co-badged debit card.
The new card can be used at retailers who have Commercial Bank and Cargills Bank card swiping machines.
Seylan Bank has also joined on a ‘non-commercial basis’, the central bank said.
LankaClear Chairman Anil Amarasuriya said that switching all local transactions to be cleared locally gives a lower cost structure to the banks.
"The Payment card industry in Sri Lanka has been dominated by international card operators, thus far, and as a result the banking and financial sector is highly dependent on these operators to facilitate card operations, Amarasuriya said.
"From a macro point of view, the National Card Scheme is envisaged to save valuable foreign exchange to the country since transactions among local banks will be routed via LankaPay network."
Sri Lanka has been hit by ‘foreign exchange shortages’ after a soft-pegged central bank targets the exchange rate (collects forex reserves) and also that prints money to artificially lower interest rates was created in 1950.
The country was the hit by foreign exchange and trade controls, suffered high inflation and currency depreciation to become a lagging nation in Asia.
Many economic activities in the country from then on were directed towards ‘saving foreign exchange’, regardless of the cost and protectionists had a ready-made excuse to justify high prices in the name of ‘saving foreign exchange’.
However the Lanka Clear card also promises to lower costs. To end foreign exchange shortages analysts have called for reform of the peg, or taking away the money printing powers of the central bank (currency board) or a true float where no foreign reserves are collected. (Colombo/June25/2019)