The introduction of a general purpose credit card that could be used at multiple merchants happened in the 1960s by Bank of America (BankAmericard, now VISA) and Master Charge (now MasterCard). Since then, when carrying out a transaction meant manually checking a customer’s card balance, the credit card has evolved a great deal. Newer payment methods have been built on top of these card networks such as PayPal and Alipay that don’t require a physical card at all. All these payment methods have made doing business far easier in the developed world, which has meant both business and consumers have benefited from it.
In Sri Lanka however, things have moved at a much slower pace. I believe the lack of enterprise and archaic regulation is hindering the growth of the digital economy. This in turn will hamper our growth while our neighbours will fly past us. In India, Paytm is making huge inroads into the Indian marketplace, which has been supported by the Indian government’s push to make India a cashless society. One of the main drivers for India has been to curb corruption, but the byproduct has been the empowerment of smaller entrepreneurs and increases in efficiency.
Virtual and mobile payments
What can we expect in the future? The idea of virtual payments is already a reality with stores such as AmazonGo, where customers can come in to a store pick up whatever you want and walk away. Physical stores such as Starbucks allows customers to order and pay for coffee before even getting to the store from their mobile app.
In the medium term we would see wearable items replacing the credit card – things such as plastic ring, a bracelet and a keychain which all contain a chip allowing the shopper to make payments on credit.
There are also payment methods such as Apple Pay and Google Wallet which allows customers to use their smart phones to make very quick payments.
Quick credit for merchants
Companies such as Square have allowed merchants that use their payment portals to have instant access to debt. The funds to be paid back with the payments the merchant collects.
How can we embrace the future?
- The Central Bank (CB) of Sri Lanka should allocate resources into understanding the digital payments.
- CB should then work with banks to implement digital payment methods as soon as possible. It could either be through third parties or as direct product offerings.
- The government should have a plan of action for a digital payment economy.
- The government must encourage citizens to start using credit cards.
- There has to be a set policy that governs digital payments in terms of online banking and payments. The added security will have a positive impact on online purchases due to higher consumer confidence.
What has to be remembered is that we need not re-build these technology products in-house. Where possible we should try to invite and make sure major players in digital payments enter the Sri Lankan market.
I believe that understanding and embracing digital payments platforms will aid Sri Lankan businesses and freelancers to grow in what is becoming a very competitive global space. It will also help in transparency and will help get rid of black money from the economy in the longer term.
(The author of this article is the co-founder/CEO of takas.lk. These are his personal opinions and do not reflect the views of his organisation. He can be reached at [email protected])
This article originally appears on The Sunday Times.