Call for radical reforms to modernize Sri Lanka’s financial system

WSO2 Founder and CEO Sanjiva Weerawarana called for radical reforms to modernize Sri Lanka’s financial system, proposing a cap on cash transactions at Rs 2.5 lakhs and the demonetization of the Rs 5,000 note.

Speaking at a Central Bank lecture on “Unleashing the Digital Economy in Sri Lanka,” Weerawarana emphasized the urgent need to accelerate digital adoption to foster economic growth and improve transparency. Weerawarana himself was solicited for a cash payment when purchasing a vehicle.

Reflecting on Sri Lanka’s progress in banking, Weerawarana noted how technology has revolutionized the industry. “Traditional banking required physical presence during limited hours. Today, with the aid of technology, we can do almost all transactions online, anytime and anywhere,” he remarked. However, despite these advancements, cash remains king, hindering broader digitization.

Sri Lanka’s digital identity system has faced delays, despite having a strong foundation. With 96% of the population holding National ID cards and birth certificate coverage at 99.7%, the country is well-placed for digital transformation. However, Weerawarana criticized the lack of progress, pointing out, “Sri Lanka has been working on a digital ID project for 20 years and has nothing to show for it.”

He also addressed the need for practical solutions to authentication challenges, cautioning against unnecessary complexity. “Real-world identity is not a seriously strong identity. Over-engineering digital identity solutions often doesn’t solve the actual problem,” he explained, advocating for scalable, user-friendly systems.

The payment ecosystem highlights the country’s reliance on cash, revealing startling figures. Of the Rs 1.26 trillion in circulation, 77% is held outside the banking system, primarily in Rs 5,000 notes.

While 19 million debit cards are active, only 1.9 million credit cards are in use, with unique holders likely fewer due to multiple cards. Additionally, government payments total Rs 330 billion annually, but digital payment platforms like Just Pay and Lanka QR remain underutilized.

“Payment is the most fundamental component of an economy—moving money around in some form is essential,” Weerawarana stressed. He highlighted LankaPay’s “human bridge” initiative, which enables government departments to integrate digital payments even without advanced system setups, as an example of bridging gaps in the current ecosystem.

Weerawarana’s recommendations to limit cash transactions and phase out Rs 5,000 notes aim to drive digital adoption and formalize the economy. By embracing these measures, combined with scalable digital ID systems and wider adoption of payment platforms, Sri Lanka could unlock significant economic potential.

Weerawarana’s analysis of the current system showed that even with outdated forms of National Identity Cards which were susceptible to forgery there was limited mass scale identity fraud in the country. (TP)

The post Call for radical reforms to modernize Sri Lanka’s financial system appeared first on DailyNews.