Sri Lanka has doubled its effort to make QR payments part of its citizens’ everyday life, removing merchant fees on LankaQR transactions up to 5,000 rupees, trying to shift consumers and small vendors away from cash and into digital rails.
The “National QR Payment Promotion Programme,” unveiled on April 6, is the latest sign that Colombo is treating payments digitization as a national economic priority. To achieve that ambitious goal, Sri Lanka already has the infrastructure, but the behavior change must follow for the country’s financial system to actually transit onto the digital rails.
The Central Bank says LankaQR, the country’s standardized QR code payment system launched back in 2017, was built to provide low-cost, secure digital payments, cut cash-management costs, improve financial inclusion, and help formalize the informal sector. Yet, almost a decade has passed and cash still dominates daily transactions, with currency in circulation at 1.48 trillion rupees and relatively modest usage of LankaQR .
As of the third quarter of 2025, LankaQR transactions were valued at about Rs 395 million per month (about $1 250 000) — a relatively small total compared to other electronic systems in Sri Lanka, despite being accepted at around 450 000 merchant locations. Per rough estimations, the novel payment system was used only for about three transactions a year per active merchant on average in 2023.
These results may be common for early-stage initiatives, but they are also bit disappointing on a background of gradual growth of overall digital payment volume, where e-commerce card payments play major role, growing by more than 27% in 2024 alone.
Sri Lanka Has Been on Consistent Payment Digitization Track for Years … With Moderate Success
QR Payment Promotion Programme is not a standalone government campaign to propel digital transactions. Sri Lanka’s Ministry of Digital Economy formally approved a National Digital Economy Strategy 2030 in March 2024, after consultation with the World Bank, framing it as part of a broader effort to build an inclusive, resilient digital economy. That strategy explicitly links digital transformation to competitiveness, growth, employment, and better service delivery.
The payments push also follows a clear policy trail. In December 2024, the Central Bank set the maximum merchant discount rate for LANKAQR at 1% from January 1, 2025, before the new April 2026 programme removed fees entirely for small-value QR transactions. That matters because merchant fees have long been one of the biggest frictions keeping tiny shops, stalls, and micro-merchants in cash.
So why does Sri Lanka need this so badly? Because cash is convenient, but it is also expensive for the state and opaque for the economy. The Central Bank’s own rationale is that digital payments make the system cheaper to run, easier to track, and more useful for bringing informal but paid activity into the formal economy. In plain terms: the government wants cleaner tax visibility, better subsidy targeting, and more inclusion for people who are not fully served by legacy banking habits.
“There is a point at which we are constrained in both our economy and our society. That is our inability to systematically and transparently collect data on our transactions, economic activities and social indicators. We have a clear state policy that subsidies should be provided to targeted communities. However, we face the challenge of how to identify those targeted groups,” explained Sri Lanka President Anura Kumara Dissanayake.
He illustrated the point with the example of current Middle East crisis, which drove fuel prices to skyrocket highs. “In that context, the most appropriate approach is to provide a fuel subsidy to the targeted groups. However, we are faced with the question of how to collect the necessary data for that purpose,” pondered Dissanayake. Transactions offer some of the richest data sources, but if they’re cash-based, they’re not on any record.
Lessons for Sri Lanka to be learned from India UPI case
India offers the obvious comparison in digital payment promotion. The Reserve Bank of India and the Ministry of Finance have spent years building a much larger digital payments ecosystem around UPI, and by March 2026 the Indian government described UPI as the world’s largest real-time retail payment system, accounting for 81% of retail digital payments in FY 2024-25. India has also paired that growth with inclusion tools such as UPI 123PAY and Hello UPI for low-connectivity and feature-phone users, plus a large rollout of QR codes and merchant touchpoints.
That is the real difference between the two strategies. Sri Lanka is starting with a strong QR incentive and an official digitization roadmap; India built a full-scale national payments highway with deep interoperability, broad merchant acceptance, and products designed for users across income and device levels.
Sri Lanka’s approach could work well for small-ticket retail, transit, neighborhood shops, and bill payments, especially if fee removal stays in place and public awareness improves. But without a wider instant-payments habit, simpler user journeys, and much deeper acceptance infrastructure, it is unlikely to replicate India’s UPI explosion at the same speed.
Nevertheless, the initiative has real upside if Colombo treats it as the beginning of a national payments shift rather than a one-off QR campaign. The best-case scenario at present is a noticeable rise in small merchant adoption, stronger digital traceability, and a gradual weakening of cash dependence in urban and semi-urban commerce.
The more ambitious outcome would be a broader formalization effect, where digital payments become normal enough to improve taxation, subsidy delivery, and financial inclusion. The risk is that adoption stalls if pricing alone changes but infrastructure convenience lacks much to be desired, which is why execution, not just policy, will decide whether the new initiative becomes Sri Lanka’s UPI moment.
