A lack of competition in payment gateways has hindered Sri Lanka’s e-commerce space. The dialogue, hosted by SLASSCOM and Daraz, highlighted the significance of enabling SMEs, cottage industries, and startups to participate in the country’s e-commerce ecosystem actively.
Despite efforts to inculcate digital payment, there is a prevailing preference for cash payments. The discussion revealed that a staggering 72% of e-commerce users in the country still opt for cash on delivery rather than online payment options. This trend stands in stark contrast to global patterns, where online payment options are known to significantly boost e-commerce sales.
Researcher Tahani Iqbal said, “The move towards digital money and payment has just been very slow in terms of developing the banking and payment sector through innovation.”
Iqbal was speaking on December 5 on a joint webinar by SLASSCOM and Daraz . The reluctance to shift towards digital payments is attributed to various factors, including the perceived high cost of payment gateways and the lack of a competitive landscape. The Lanka Pay QR initiative, designed to facilitate digital transactions, faces challenges in terms of payment gateway providers charging prohibitive costs, hampering its broader implementation.
To date, no payment gateway provider allows merchants access to a sole Lanka QR Code payment gateway in line with the cost tariff set out by Circular No 2 of 2019- Establishment of a National Quick Response Code Standard for Local Payments. Under the scheme, merchant discount rates are below 1% with the LankaClear Network taking a fee under Rs 3 for utilizing the system.
Addressing these concerns requires a multifaceted approach. Initiatives like regulatory sandboxes, which enable businesses to trial innovative payment systems, should be leveraged more effectively. Creating a culture of awareness and trust in digital transactions, along with the implementation of robust data protection and cybersecurity laws, is crucial for fostering a secure and conducive environment for e-commerce growth.
SMEs, defined as entities with approximately 300 individuals and revenue not exceeding LKR 750 million, form a substantial part of Sri Lanka’s economic landscape, particularly in rural areas. With around 1.7 million SMEs contributing significantly to GDP growth, generating employment, and facilitating exports, their involvement in e-commerce becomes imperative.
Additionally, the government’s focus on international partnerships and negotiations, especially with global payment gateways like PayPal, remains pivotal.
The upcoming Digital Economy 2030 strategy aims to tackle these challenges head-on, fostering a more positive and conducive environment for the growth of the digital economy. By aligning strategies, addressing regulatory gaps, and enhancing payment system competition, Sri Lanka can pave the way for a thriving e-commerce ecosystem that includes and benefits all segments of its economy. TP
