• Digital transactions expand over 50 percent in 2023
• Still 76 percent (Rs.900 billion) of the currency in circulation held by the public

By Nishel Fernando 

Despite the significant surge in adoption of digital payment in 2023, Sri Lanka is yet to reach inflection point in digital transformation as the economy still remains largely a cash-based, industry stakeholders said.

In 2023, the number of digital transactions (Internet based Payment Systems) rose by 51.2 percent Year-on-Year (YoY) to 247.8 million transactions in reaching a new high. The overall value of these transactions rose by 19.5 percent YoY to Rs.12, 660 billion in the year. 

The value of these transactions as a percentage of GDP reached 45.4 percent compared to mere 8.7 percent in 2019.

In particular, LANKAQR transactions rose by an impressive 90.5 percent YoY to 333,000 with value of these transactions reaching Rs. 3,383 million in 2023.

“These figures underscore a rapid embracing of digital payment solutions. Still, we cannot become complacent, we have lot more to do, still the share of usage is quite low, and we need to do more to reach the levels that India has reached,” Central Bank Governor Dr. Nandalal Weerasinghe said.

He made these remarks at an event held in Colombo this week to announce the partnership between Sri Lanka’s National Payment Network Lankapay and India’s most popular FinTech app, PhonePe towards accepting UPI payments at LankaQR merchant points.

Dr. Weerasinghe noted that this surge could be attributed to  several factors including internet access, widespread smartphone usage and proactive efforts of both the government and private entities.

Meanwhile, Lankapay CEO Channa de Silva noted that Sri Lanka still largely remains a cash-based society with 76 percent (Rs.900 billion) of the currency in circulation held by the public at end of 2023. However, he pointed out that this represents a significant untapped potential for industry players to capitalise on, in particular in the SME sector which holds the majority of cash, accounting for 52 percent of the GDP.

Unlike in India, Sri Lanka is yet to reach the inflection point in digital transformation. The digital ID , demonetisation and the pandemic helped India’s digital transformation. 

Speaking at the occasion, India’s High Commissioner in Colombo Santosh Jha highlighted that India transformed from the world’s most unbanked nation in 2008 to the nation with highest volume of digital payments globally at present. 

According to research, nearly 82 percent of Sri Lanka’s smartphone are e-commerce buyers; however, 48.23 percent of them resort to cash on delivery, which perhaps is an indication of their reluctance to trust digital payment systems.

However, Dialog Finance PLC Chairperson and Dialog Axiata Group Chief Digital Services Officer Renuka Fernando warned that the inflection point in Sri Lanka’s digital transformation could happen before businesses know it; hence, she remarked that businesses better prepare for it in advance.