If there’s one thing technologists and bankers can agree on is that the future will be cashless. Across the world, banks and fintechs are working towards digitizing banking and payments. However, in Sri Lanka, cash is still the king that stubbornly refuses to die. It was only the past few years that we’ve seen a push towards cashless payments. With this push, banks are transforming everything from their Internet Payment Gateways (IPG) to their POS terminals while embracing newer technologies like NFC and QR codes. To understand how this transformation takes place and the challenges a bank must overcome, we sat down with Thusitha Suraweera – Head of the Commercial Bank Card Center to find out.
MPGS – The next big leap for Commercial Bank IPG’s
Since Commercial Bank began offering IPG services 10 years ago, technology has undergone an immense evolution. When the decade began, we lived in an age of feature phones and we primarily accessed the internet with a desktop computer. Today, we have smartphones that allow us to share our location over the internet, get a cab, and pay for it with a few taps. Looking back, it all seems so rudimentary.
Recognizing this shift, Commercial Bank now offers a newer Internet Payment Gateway Solution from Mastercard to its clients, known as Mastercard Payment Gateway Services or MPGS, which is one of the world’s leading payment gateway platforms. To that end, it offers a number of features, including responsive screens, which has been a much requested feature from the local eCommerce industry.
Similarly, MPGS also offers tokenization support. This eliminates the need for you to re-enter your card details when doing repetitive transactions with a specific merchant. Behind the scenes, your card details are stored securely by the bank, which generates a unique token. This token is shared with merchants instead of your card details, which can be utilized whenever you buy something. “It’s what Uber does when you add your card,” explains Thusitha.
To integrate the ComBank IPG into their websites, merchants can use multiple languages such as PHP, Java, or C# (pronounced C sharp). The bank offers sample codes, test environments, and other tools to facilitate the integration. When asked how long this process can take, Thusitha shared, “It depends on the developers the merchant is working with. On average, we see it takes a month but we have also seen extreme cases where a merchant completed integration in just 3 days.”
So how much does it cost for a business to begin using MPGS? Generally, a business will have to pay a setup fee, a monthly maintenance fee, and a commission on each transaction. On average, a business might pay Rs. 30,000 as the setup fee and Rs. 5,000 as the monthly maintenance fee. But like the commission, the exact amount of each of these fees vary depending on 4 factors. These are the average transaction size, nature of the business, target clientele (local or foreign), and billing currency (LKR or any other major foriegn currency).
Making secure digital payments frictionless
When it comes to security, MPGS is fully PCI-DSS compliant. With pride, Thusitha states, “Commercial Bank is the first bank to be fully certified and meet the needs to be PCI-DSS compliant in Sri Lanka.” Adding to this, he mentioned that over the years, the bank has developed fraud management solutions for its clients in partnership with Mastercard. One of them being for the payment processing of call center originated payment transactions of SriLankan Airlines.
Currently, the industry utilizes a protocol called 3D (Three-Domain) Secure 1.0 to provide merchants and issuing banks a way to authenticate cardholders as they shop online. This additional layer of security helps prevent unauthorized use of cards and protects eCommerce merchants and issuers from exposure to fraud. It was this protocol that directed you to a web page by your bank whenever you bought something online. The technology is over a decade old. While it still works, the experience it offers comes with a lot of friction for users. This is what forced the development of 3D Secure 2.0.
“Within the next 18 months, you’ll see a big change with the arrival of 3D Secure 2.0,” says Thusitha, promising it would make transactions more convenient and frictionless. Describing how, he explained that it offers more data to the point, “On the backend, we’ll know how many devices you use.” The system would utilize this data to analyse if you’ve carried out 3D secure transaction before on a device, at a certain location, and a number of other factors.
Based on this analysis, a risk score is calculated. In turn, it’s used to decide if it’s necessary for a customer to fill in an OTP or other measures. Otherwise, the OTP is bypassed to make the transaction frictionless. This is the vision. However, behind the scenes of a digital transaction, there’s a number of parties involved to make it a reality. The challenge, as Thusitha puts it, “is to get everyone aboard. Sometimes the merchant might be 1.0 whereas the issuer is 2.0,for transactions to be seamless, everyone has to adopt it.”
Collaboration to fuel an industry
The vast majority of e-commerce customers now utilize MPGS from Commercial Bank as their IPG. Also the bank has introduced a simplified version of the same facility branded as “Simple Pay” to enhance it’s contribution toward SMEs. Sri Lankan entrepreneurs can now create their own online store with no coding or web development skills, sell products, accept electronic payments and significantly enhance their business opportunities.
Alongside this, the bank has also partnered with PayCorp to offer another solution for price sensitive customers. Thusitha shares that these products allow the bank to offer its services to previously untapped or inaccessible markets. He goes onto state that, “the bank being the biggest lender to the SME sector, it is important to empower local entrepreneurs in all fronts to enhance the contribution of SMEs to the economy.”
Turning cash payments into digital payments
While Commercial Bank is transforming its IPG’s, it hasn’t forgotten about its other avenues of payment. Beyond IPG’s, the bank also offers a host of Point-of-Sales (POS) solutions. Since 2016, all of these POS terminals have been NFC enabled. This means if you have an NFC enabled card, all a cashier needs to do is tap it on the terminal and the transaction is done. If it’s less than Rs. 5,000 then you don’t need to sign a receipt.
Thusitha believes that NFC is another piece of technology that can be utilized to eliminate friction in transactions. Speaking to ReadMe, he shared that 3 months ago, Commercial Bank saw 5,000 NFC transactions a month. Today, they process 35,000 – 40,000 per month, which he describes as, “a holistic growth that’ll speed up queues and bring greater convenience to consumers.”
Alongside, NFC, Commercial Bank is also working towards introducing an Android based POS terminal. Through the use of Android, the bank hopes to allow developers to build an ecosystem of apps that can work on its POS terminals. For security reasons, it would still be a separate device. For merchants that wish to use something simpler to accept digital payments, they offer a device called Easy POS. This is a card reader that can be paired to a smartphone via bluetooth to accept payments.
Beyond POS terminals, Commercial Bank is also investing towards facilitating payments via QR codes. In July 2019, the bank launched the ComBank Q+ App to do so. “We launched the App to introduce the concept to the market. In the future, it might be combined with our digital banking App, which itself is undergoing a transformation,” shares Thusitha.
The Q+ App offers customers a faster way to make payments. Yet the greater benefit is for the merchants who merely need to print the QR code on a piece of paper and download an app. As such, Commercial Bank doesn’t charge any sign up fee from merchants to accept payments with QR codes. Instead, it only charges a 1.5% transaction fee.
So what’s holding us back?
Thusitha is a firm believer in the benefits of adopting digital payments on a mass scale. “By making this shift, businesses can offer greater convenience, especially in an era where they may not even see their customers face to face. Since there’s an accessible papertrail of all transactions, it also allows us to more easily gauge the performance of a business when they come to us seeking financial support to grow,” he advocates.
However, he admits there exists a wide gap that needs to be bridged in Sri Lanka. We are still a predominantly cash based economy. According to the Central Bank, there are approximately 23 million debit cards alone. Yet, these are primarily used at ATMs to withdraw cash, with only a handful of transactions being used at POS machines. Nevertheless, Thusitha believes in 2 things can help change this phenomenon.
The first is the introduction of 3D Secure 2.0 to eliminate friction in online transactions. The second is QR code payments. Elaborating on the latter, he points to the introduction of LANKAQR, which has brought standardization to the industry. This means you can use a card from VISA, MasterCard, CASA, or any other payment method you wish by scanning a single QR code.
But to bring about a true digital transformation in banking, Thusitha argues the need for digitized Know Your Customer processes. This is a process in banking to identify potential customers, assess their suitability, and identity through digital means.
Currently, as per regulations, this requires anyone requiring the services of a bank to physically visit a branch. To say it’s less than ideal would be an understatement. But in an ideal world, digital identification would make it possible to eliminate this need entirely. Thereby allowing you to access everything a bank offers from your phone.
“All you’d need to do is take a picture of yourself. We can then verify your identity by comparing it with the one on your NIC by accessing a regulated database. It’s possible to do the same for fingerprints as well with modern smartphones. Just like that it’s done! Digital KYC processes will solve many problems. You won’t even need to step into a bank!” said Thusitha explaining the concept.
Needless to say, being able to get the services of a bank without having to visit a branch, is a dream. One that both customers and business owners hope will become a reality soon. Digital KYC processes might help push cashless payments forward. Yet, it’s still very much dependent on the attitude of customers, which Thusitha describes as, “The hardest challenge but new technologies such as MPGS and QR codes can eliminate friction resulting in digital payments being as fast as giving a Rs. 100 note to a cashier but significantly more convenient for everyone.”