LankaPay: Powering Sri Lanka’s Cashless Future

Speaker:

• Channa Silva — CEO, LankaPay

This episode of the Advocata podcast unpacks the infrastructure quietly powering nearly every digital transaction in Sri Lanka — from ATM withdrawals and bank transfers to QR payments and government fee collection. The guest is Channa Silva, CEO of LankaPay, the national payments network that most Sri Lankans use daily without realizing it.

Silva begins by explaining LankaPay’s origins as LankaClear, established in 2002 to solve a specific problem: interbank check clearing that once took six to eight days. Central bank, as regulator, could not directly run such a system, so LankaClear was set up as a public-private partnership — roughly 47% government-owned (via the central bank and state banks) and 53% owned by commercial banks — structured deliberately as a private company so it could move quickly on technology rather than face the slower pace typical of government entities. Its shareholding is capped by charter at under 48% government ownership specifically to preserve this operational agility, even though the entire system remains fully regulated and supervised by the central bank, with all connecting institutions requiring central bank approval and adherence to international security standards like PCI-DSS.

From check imaging (which cut clearing time to one business day by 2006), the organization expanded into interbank ATM connectivity in 2013 — allowing customers to withdraw cash or check balances at any bank’s ATM, not just their own — and then real-time fund transfers in 2014, which now underpin most digital payment activity in the country. Silva describes the technical mechanics in plain terms: LankaPay functions as a secure messaging and routing layer between banks, transmitting standardized instructions (“credit this account this amount”) and confirmations, while actual bank-to-bank settlement happens separately through the central bank’s RTGS system. He also distinguishes between LankaPay’s various rails: real-time one-to-one transfers (SEFT), bulk one-to-many payments for salaries and government disbursements (SLIPS, which run on a same-day rather than instant basis), and a domestic USD clearing system that dramatically cut the cost of interbank dollar settlements previously routed through expensive international Nostro channels.

A significant portion of the conversation addresses fintech integration. Because fintech apps aren’t directly regulated as banks in Sri Lanka, LankaPay built a system called JustPay, allowing a fintech platform to partner with a licensed bank and plug into the broader network — meaning apps like HelaPay don’t move money themselves but instruct a partnered “acquiring bank” to execute transactions through the regulated rails. This, Silva argues, has “democratized” the payments ecosystem by letting fintech apps offer more user-friendly interfaces while keeping all transactions within the formal banking system.

On international connectivity, Silva explains that LankaPay expanded beyond domestic transactions partly in response to Sri Lanka’s foreign exchange pressures during the economic crisis, aiming to formalize remittance flows and tourist payments that were previously routed through informal or illegal channels. This produced LankaRemit for overseas remittances, and partnerships enabling foreign QR and card networks — India’s UPI, China’s UnionPay and Alipay+ (covering 36 regional wallets), with WeChat Pay integration in progress — to work seamlessly with Sri Lanka’s LankaQR standard, letting tourists pay using apps they already use at home, debited in their own currency.

A substantial segment covers Lanka QR itself and the economics behind it. Silva describes how Sri Lanka, despite near-universal banking access (90% of the population banked, over 19 million debit cards issued), saw poor uptake of card payments because international network routing pushed merchant commission rates (MDR) to 2-3% — a burden manageable for large retailers but often untenable for small merchants. Rather than pursuing a “free” model, which Silva argues is unsustainable given the real costs of maintaining secure infrastructure, LankaPay targeted a psychologically painless threshold: a QR standard priced at roughly 1% commission, with zero upfront device cost to merchants, addressing both the affordability problem and the practical barrier that only about 130,000 point-of-sale terminals existed nationally (covering perhaps 50,000–60,000 unique merchants) against a vastly larger merchant base. LankaPay deliberately enforced a single national QR standard to avoid consumer confusion, while keeping the system open to any bank, financial institution, or fintech to issue compliant QR codes — preserving competition without fragmenting interoperability.

Silva addresses skepticism about Sri Lanka’s digital payment adoption by urging comparisons benchmarked to GDP rather than raw volumes against much larger economies like India. He cites that LankaPay’s systems processed transactions exceeding Sri Lanka’s total GDP in 2024, with real-time payments alone exceeding 50% of GDP. He attributes lagging QR-based retail adoption less to commission rates (noting a controlled experiment where halving fees during COVID had no adoption effect) and more to merchants’ fear of entering the tax net once transactions become digitally traceable — suggesting policy solutions like preferential tax treatment for digital transactions rather than punitive approaches.

The conversation also touches on digital signatures (LankaPay operates Sri Lanka’s only certification authority, already embedded invisibly in salary transfers and bank mandates), cybersecurity (emphasizing that most incidents are social-engineering scams like OTP fraud rather than infrastructure breaches, mitigated through FinCERT and baseline security standards), and why global platforms like PayPal and Apple Pay remain unavailable locally — a commercial decision by those companies based on market size and card penetration rather than any regulatory barrier.

Silva closes by detailing GovPay, LankaPay’s solution for digitizing payments to government departments lacking their own IT systems, using existing physical invoices and customer banking apps to route payments directly into state accounts — now extended to traffic fines, court fees, and municipal payments, with government transaction volumes growing sixfold within months of launch.