Cashless Society. I borrow the term from President Anura Kumara Dissanayake. He said it is exactly what he ultimately envisages – incidentally at the launch of Govpay.lk, the digital platform that enabled every government organization to start offering the opportunity of virtual payments to citizens. There could not have been a more appropriate instance to make that remark.
This piece is not about Govpay.lk or any other digital payment systems. Ample literature exists on these topics. Instead, I aim to analyze the research question regarding the extent to which Sri Lankan society is aligned with the President’s vision of a cashless society. If we find ourselves significantly distant from this goal, it may indicate deficiencies in the existing systems. Conversely, if the distance is not substantial, the challenges may lie elsewhere.
Let me start this exercise with myself. This is primarily for convenience, but I am not too different from any other professional. So that will be the story of any middle-class professional. The stories of the layers above and below might be different. We will get into that later. First, my story.
As far as the money that comes to my hand, I am a complete cashless animal. All my income transactions occur in a fully virtual mode. For instance, my salary is deposited by my organization through the Sri Lanka Interbank Payment System (SLIPS), which is widely recognized as the primary electronic fund transfer system on the island. Similarly, payments for my weekend lecturing engagements and the articles I write are also processed through the bank, ensuring that all my income is managed electronically. The SLIPS recorded 52 million transactions in 2023, amounting to Rs3,471 billion in value. Every payment is systematically recorded.
This cashless system offers numerous advantages to all parties. I do not need to visit a bank or office to receive cash payments, nor do I have to contend with the inconvenience of accepting damaged currency notes, such as a torn Rs5,000 note (a few years back, when I was less cashless, I had that unpleasant experience).
Additionally, I eliminate the risks associated with carrying large amounts of cash, which can make one vulnerable to theft. (When I was a kid, once, my father’s wallet with his entire monthly salary was pickpocketed. I still remember the hardships we went through in that month.) Banks also benefit from this arrangement, as they do not have to allocate valuable man-hours to service my cash transactions. Finally, the Inland Revenue Department can easily track all recorded transactions under my name, facilitating tax compliance.
I believe this experience is representative of many professionals today. We are already living in a cashless society concerning our income, allowing us to enjoy our cultural rights, as indicated by the President, such as watching movies on Netflix, without the burdens associated with cash transactions.
This may not be the case for every Sri Lankan, though. Before getting into that, let’s see my expenditure side, where I am forced to make some cash transactions despite my reluctance.
The bulk of my routine payments are conducted using my credit and debit cards. These payments encompass weekly purchases from various supermarkets, selected food items, and utility bills for electricity, water, and internet services. Additionally, I manage medical expenses, including consultation fees, as well as fuel charges. Occasionally, instead of supermarkets, I opt to purchase fruits and vegetables from the economic center at Narahenpita. It is encouraging to note that some shops in that area now offer electronic payment facilities. So far, so good.
Still, there are a few payments I do have to make in cash. Let us examine the reasons why we have not yet eliminated these transactions. A caretaker assists my elderly father, and we pay his weekly salary in cash, which is his preferred method of payment. I prioritize his convenience in this matter. Then, we hire carpenters, plumbers, and gardeners on an as-needed basis, and payments for their services are typically made in cash.
Additionally, I often make cash payments when purchasing food items from roadside vendors. While I could inquire if they accept mobile cash systems, cash remains a convenient option for both parties. Occasionally, we also purchase items such as brooms, coir carpets, or clay pots from small shops, where the selection is often better, and cash is the customary form of payment. I make my charity in cash. Sometimes, I pay a tuk-tuk in cash. My son travels to university by bus and pays for his tickets in cash, as well as for his meals at the canteen. One sees at one end of all transactions above, there is an individual we may typically term as ‘low income’.
This highlights that, despite the accessibility of technology, there remains a segment of the community that is unlikely to adopt digital solutions any time soon. These individuals, such as my plumber and carpenter, typically receive their payments in cash, which they subsequently spend. While transitioning to digital transactions could offer significant benefits for them, convincing this group to make the switch poses a challenge.
Thus, we find ourselves in a Catch-22 situation: the President is eager to promote cashless transactions among this demographic, but such a transition will not occur unless they advance to a higher socioeconomic class.
Even though the transaction amounts within this group may be smaller, the overall volume is substantial. Consequently, a considerable portion of the community is likely to remain outside of a cashless society—not due to a lack of technology or resources, but rather due to their reluctance to change. This is why currency still represents 4.3% of GDP in value. This is relatively high.
Not that we lack technical means for payment systems. So far, we have not seen a grand success. For instance, Lanka QR was launched in 2019, and four years later, its usage has only reached Rs153 per citizen. This indicates that a significant number of individuals remain unaware of its existence.
The volume of credit and debit card transactions in Sri Lanka is quite low, with an annual per capita spend of Rs32,000 for credit cards and Rs26,000 for debit cards. Cumulatively, this suggests that each citizen is conducting transactions of less than Rs5,000 per month. Given the high transaction volumes at the upper end, it is evident that many individuals classified as ‘low income’ continue to be excluded from the digital financial system.
The problem is not just with that layer. In the realm of payments, we remain reliant on means that should have been phased out long ago. For example, in 2023, the annual per capita transaction value for cheques was approximately Rs481,000, equating to around Rs40,000 per month—eight times higher than the average card payments.
Furthermore, data indicates that cheque usage in Sri Lanka has increased year over year for the past five years, contrasting sharply with the declining trend observed in developed countries. These are true issues we face in popularizing digital payments.
Interesting to see how other countries have addressed the same issue. Developed countries have tackled the challenge of integrating low-income populations into digital payment systems through a combination of government initiatives, infrastructure development, private sector innovation, financial literacy programmes, and incentives for businesses and consumers.
One of the most effective strategies has been government-led financial inclusion policies, where subsidies and incentives such as cashback, discounts, and tax benefits encourage digital transactions. Many countries also mandate the digital disbursement of welfare benefits, ensuring that low-income populations have access to digital payment methods. In parallel, investments in infrastructure, such as affordable internet access and national digital identity programmes (e.g., Estonia’s e-Residency and India’s Aadhaar, though India is not a developed nation), have played a crucial role in easing financial access.
The private sector has also been instrumental, offering solutions such as zero-fee basic bank accounts, mobile payment platforms like PayPal and Venmo, and interoperable financial services that allow seamless fund transfers. Additionally, innovations like BNPL (buy now, pay later) help low-income users access essential goods without upfront cash constraints. They extend credit to individuals who may not meet the stringent requirements of traditional credit cards, thereby broadening the consumer base. The simplicity of BNPL applications, often seamlessly integrated into online checkout procedures, contributes to their widespread adoption. The allure of interest-free installment options further incentivizes consumers, making larger purchases more manageable.
That said, technology alone is insufficient without user trust and education. Many governments and NGOs run financial literacy programmes to educate low-income individuals on the benefits and security of digital payments. Robust consumer protection policies, such as the EU’s PSD2 regulation on secure payments, have further built trust in digital transactions.
To accelerate adoption, developed nations have also focused on merchant-side solutions, making it easier for small businesses to accept digital payments through low-cost POS systems and QR code-based transactions. Some governments provide tax rebates and other incentives to encourage businesses to transition to cashless models. Collectively, these efforts have significantly increased digital payment adoption among low-income populations, bridging the financial gap and promoting economic inclusion.
Even if all these efforts prove unsuccessful, the existence of a minority within the community that does not depend on digital finance should not be regarded as a significant concern. This phenomenon is to be anticipated, as even developed nations encounter similar circumstances. Individuals within this demographic typically engage in low-value transactions, for which cash remains the most convenient medium of exchange.
On the other hand, what is truly important is the presence of a community that engages in substantial cash transactions, not solely for convenience but due to the absence of a transaction trail. This particular group warrants careful observation. The lack of a documented trail for relatively large payments raises suspicions. Our objective is to prevent such occurrences at all costs. Consequently, the concept of a true cashless society should not be characterized merely by a refusal of tuk-tuk drivers to accept cash; rather, it should be defined by the exchange of suitcases filled with banknotes that leave no trace. It is reasonable to suggest that this may also represent an ultimate goal for the President.
Chanuka Wattegama [email protected] is a Public Policy Researcher and an academic. The ideas expressed are personal.