Transforming transit payments in Sri Lanka: Practical and inclusive path forward

Reliance on cash within the public transport system presents a range of operational, financial, and regulatory challenges that digital payment ecosystems are well positioned to address

The public transport sector of Sri Lanka plays a vital role as a backbone of this nation’s economy, facilitating affordable daily commutes to millions of workers, enabling intercity travel and providing essential connectivity for both locals and tourists exploring this beautiful island nation. 

Digital transformation continues to feature prominently in Sri Lanka’s national agenda of discussion, with public transport identified as a priority area for modernisation. While there is consensus on the fact that digitisation is essential and time critical, the methodology of implementation remains a topic of debate, with the emphasis focused on what would make most sense within the Sri Lankan context. Any proposed solution must account for the unique behavioural patterns of this nation’s citizens, while having a pragmatic understanding of the financial and infrastructure limitations that we are dealing. The goal must be to establish a solution that is effective, widely adopted and most importantly sustainable in the long term. 

To set the stage for the discussion, it is important to first examine the current state of affairs. Sri Lanka’s public transport sector remains predominantly cash-driven, with an estimated Rs. 15 to 18 billion in circulation each month. This heavy reliance on cash introduces systemic inefficiencies from slowing down boarding times, prolonging fare collection, to limiting transparency for operators, regulators, and commuters alike.

Compounding the challenge is the presence of multiple stakeholders across the sector from private and Sri Lanka Transport Board (SLTB) buses, to the national railway network. Each of these segments contribute to the complexity of implementing a unified digital fare collection system.

While the idea of a national transit card has been explored before in Sri Lanka, many past initiatives failed to move beyond pilot stages often due to implementation bottlenecks, unclear stakeholder alignment, or limited public uptake. Some approaches placed heavy emphasis on stored value or top-up card models, which required dedicated hardware like specialised terminals and kiosks, along with the cost and logistics of printing and distributing physical cards. These dependencies added significant financial and operational burdens, making it difficult to scale such solutions across the country.

I believe it’s important to share the context that informs my perspective, as it helps explain the thought process behind the conclusions in this piece. My views are shaped by experiences across different environments, starting with a small startup involved in Government digitalisation projects, where I worked closely on public-sector implementations and encountered first-hand the challenges, nuances, and frustrations that often accompany such initiatives. My time at a regional fintech in Sri Lanka gave me a better understanding of the local payments ecosystem, including how digital banking and merchant acceptance systems operate in the country. I now work at a multinational fintech operating across APAC, Middle East and Africa (MEA), and Latin American (LATAM), which has provided broader insight into how digital transformation is approached in different markets around the world.

A personal reflection on seamless transit payments

To set the stage, I would like to walk through some personal experiences from transit card implementations that I had the opportunity to observe and offer a few insights to frame the discussion.

One particularly noteworthy example is Singapore, which arguably boasts one of the most seamless national transit systems in the world. The onboarding process is as easy as it is convenient. Before even exiting the airport, travellers are welcomed by kiosks offering details into the Transit Payment system, as it is quintessential if one is to navigate through the dense urban landscape of Singapore. At these kiosks, they can purchase stored value cards, which can be topped up using Singapore Dollars (SGD) or any international payment card (Visa, Mastercard, AMEX, JCB, etc.) directly at the machine.

Alternatively, customers can skip the stored value card entirely and simply tap their NFC-enabled debit or credit card, whether locally issued or international on the transit terminal.

Stored value cards are part of a legacy system introduced Singapore in 2002, primarily through EZ-Link and NETS FlashPay. For those unfamiliar, a stored value model involves preloading funds onto the card, with the balance physically stored within the card itself, enabling offline transactions. This closed-loop ecosystem became a global reference point for many other countries rolling out their own systems. However, the main drawback of such systems is exactly that: their closed-loop nature. Topping up often relied solely on cash or the domestic card scheme (NETS), limiting flexibility for users and visitors alike.

Then in 2019 Singapore introduced the SimplyGo the new system for payment processing and management within the transit network. SimplyGo allowed users to link their EZ-Link cards to their bank accounts or to any domestic or international payment cards (Visa, Mastercard), removing the need to store value directly on the card. The introduction of a dedicated mobile application further enhanced the experience by allowing commuters to register, manage, and track their payments in real time, and set up automatic or one-time top-ups from linked accounts or any credit/debit card.

And for those who preferred not to use a transit card at all, SimplyGo allows commuters and tourists to tap and pay at terminals directly using their credit/debit cards, with fares deducted like a normal retail transaction. This eliminated the need to ever buy or manage a physical transit card in the first place. 

Additionally, the shift to an account-based model offered stronger security, because if a card is lost or stolen, users can simply unlink it or block it via the app, without losing their balance as the money value is not stored in the card.

However, the biggest win here was the dramatic expansion of top-up and payment options, moving beyond earlier reliance on cash and domestic methods to a system that fully embraced global interoperability.

This provides the customer true flexibility in terms of payment options, which cascades into one of the cornerstones of a successfully digitalised payment system which is the democratisation and enhancement of financial opportunities that we can provide to the end user, thus driving towards greater financial literacy across the board. 

The Singapore government plans to sunset stored value cards in favour of the new digital system, which eliminates the need to print physical cards or maintain a widespread network of top-up kiosks, resulting in significant long-term cost savings for the state. This aligns well with the broader digitalisation and environmental goals of the country. 

While the original target was to complete the transition by 2024, the timeline has since been extended to 2028 to accommodate an aging population still comfortable with the legacy system. Even in a country as digitally advanced as Singapore, this highlights an important truth: the pace of digital transformation must match the readiness of the population. The goal should never be innovation for its own sake but adoption, trust, and sustained use. 

Similar parallels can be drawn with OVPay in the Netherlands, another fully interoperable, account-based transit ecosystem. OVPay enables fare payments through physical and virtual cards, digital wallets, and offers a printed “OVPas” card for those who still require a physical option. Through this ecosystem, the Dutch government is able to push targeted incentives such as age-based fare discounts for seniors and children. There are also ongoing discussions around integrating subscription-based travel models, reflecting the system’s flexibility for future value added services.

Closer to home, Maldives presents a more grounded but no less innovative approach to transit payments. Across its islands, POS devices are installed on buses and ferries enabling passengers to simply tap any NFC enabled card for fare payment. For those who prefer not to use a card, the RTL mobile application allows users to purchase tickets online through an internet payment gateway. The ticket’s QR codes can be scanned using the same POS terminals. 

While the Maldives implementation may appear less complex than the highly interoperable systems of Singapore or the Netherlands, it is deeply aligned to the country’s demographic, infrastructure, and resource context. And in that sense, it represents a realistic and highly relevant benchmark for countries like Sri Lanka.

Reliance on cash raises challenges

Bringing the focus back to Sri Lanka, the reliance on cash within the public transport system presents a range of operational, financial, and regulatory challenges that digital payment ecosystems are well positioned to address.

For commuters, cash is both inconvenient and inefficient. Passengers often struggle to provide exact change, and in many instances, conductors round up fares arbitrarily, thus leading to inconsistent pricing and daily frustrations. This lack of standardisation undermines the overall experience and erodes trust in the system.

For bus operators, especially within the private sector, the shift toward digital fare collection could be transformative. Revenue leakage from fare evasion, theft, and inefficient cash handling is estimated to exceed 5% to 8%, and may be even higher in certain corridors. The absence of real-time transaction records deprives operators of visibility into earnings, making it difficult to track income, spot anomalies, or make informed operational decisions. A digitised system introduces transparency, accountability, and the potential for far more efficient and financially viable operations.

From the Government’s perspective, the broader cost of maintaining a cash-dependent economy is substantial. According to 2024 data published by the Central Bank of Sri Lanka, the annual cost of printing new currency stands at approximately Rs. 3.6 billion. This figure excludes a host of related expenditures: currency transport, vault security, storage, staffing, coin logistics, and the destruction of damaged notes. These often-overlooked costs further underscore the case for a national shift toward digital payments in the public transport ecosystem delivering not just convenience, but significant long term fiscal savings.

Reflections on previous initiatives

Over the years, Sri Lanka has witnessed several attempts to introduce digital transit payment solutions. These initiatives, while ambitious in scope, often encountered implementation hurdles that ultimately limited their reach and effectiveness.

One such example includes a telecom-led pilot project that tested prepaid cards on select bus routes. To accommodate passengers without cards, conductors were issued dedicated cards to process cash payments on behalf of travellers. However, the initiative struggled with adoption, largely due to the absence of a widespread top-up infrastructure and the limited usability of the cards within a closed-loop system.

In 2018, efforts were made at the policy level to establish a multi-agency coordination committee to drive a unified transit card agenda. The intent was to integrate payment systems across buses and railways, creating a truly interoperable transport experience. However, despite the strategic intent, progress stalled amid technical and institutional complexity.

Meanwhile, LankaPay introduced a chip-based “2-in-1” NFC card in 2019, aimed at facilitating secure, low-value contactless payments, including those for public transport. This marked a step toward convergence between banking and mobility services, but widespread uptake remained limited.

These efforts, though valuable, reveal a common missing thread which is the need for a more coordinated, scalable, and user-centric approach. Future implementations must avoid overreliance on heavy infrastructure or proprietary systems and instead focus on solutions that are flexible and capable of leveraging what is already widely available such as existing banking rails, national payment networks, and mobile connectivity.

The way forward

There is much to be learned from Sri Lanka’s past attempts at implementing a transit payment system. One of the clearest gaps has been the absence of a unified, nationally backed initiative with the mandate and momentum to see such a transformation through. Equally important is a realistic assessment of what kind of solution, card-based or cardless, centralised or distributed, best fits the Sri Lankan context.

Lessons from international implementations offer valuable insights, but success depends on applying them through a localised lens. Avoiding the missteps of the past and ensuring future scalability require a phased rollout that builds on what is already available, rather than attempting to impose an entirely new ecosystem overnight.

Leveraging established infrastructure – Phase One 

Sri Lanka currently has over 19 million debit cards and 1.9 million credit cards in active circulation. Drawing inspiration from countries like the Maldives, an immediate opportunity lies in allowing commuters to use their existing domestic and international debit/credit cards for transit payments. This would eliminate the large investments of time, costs and resources associated with printing dedicated NFC-enabled transit cards and would also remove the need to deploy physical kiosks for top-ups. Instead of creating new dependencies, the system can build on infrastructure that is already familiar and trusted by both locals and tourists.

The most pressing challenge in enabling card-based fare payments is the lack of a nationwide fleet of NFC-capable Point-of-Sale (POS) terminals installed in busses and railway stations. While a limited number of SLTB buses are currently equipped with POS devices, a broader rollout would require significant investment, something that has proven to be a barrier even within the merchant acquiring landscape of the country, where SMEs often struggle to justify the cost of purchasing or subscribing to enable POS terminals to accept card payments.

This is where SoftPOS (Software Point of Sale) technology becomes a compelling alternative. Unlike traditional POS terminals, which involve specialised hardware, SoftPOS is a mobile application that transforms any NFC-enabled Android smartphone into a fully functional payment terminal. Deploying fleets of cost-effective, commercial off-the-shelf (COTS) NFC enabled Android smartphones pre-installed with SoftPOS software allows for secure, tap-to-pay transactions without the burden of expensive hardware rollouts. This not only reduces infrastructure costs but also suits the operational realities of Sri Lanka’s overcrowded and highly mobile public transport environment where conductors move constantly throughout the bus from passenger to passenger collecting payments. 

In addition to Tap to Pay for debit and credit cards, with integrations with the local payment rails in the country these devices can go beyond being standard card acceptance terminals. We can enable payments through QR codes (LankaQR), Mobile Wallets, Virtual Cards created against wallets/accounts, and other open-loop payment methods, which would allow for a truly inclusive and interoperable transit system that is adaptable to future innovations and policy directions.

Introducing a digital transit app – Phase 2

A national mobile application could play a pivotal role in digitising the entire transit experience. Drawing inspiration from apps like SimplyGo in Singapore and RTL in the Maldives, this platform could serve as the digital layer that brings together travel, payments, and customer engagement. The scope of this application extends beyond the domain of payment acceptance, through the enabling of various Value-Added Services from real-time travel history, digital receipt generation, managing payment methods, viewing bus/train schedules, customer feedback modules regarding the experiences, loyalty and cashback modules to drive engagement and many more.

While Google and Apple Pay are not yet enabled by the respective providers within the region, it is possible for the country to look into leveraging Host Card Emulation (HCE) technologies in collaboration with tokenisation providers, in order to enable Tap to Pay on customer’s smartphones which would eliminate the need for customers to use physical debit/credit cards. This adds another layer of payment acceptance for the customer, where they can link their cards on the transit application, allowing for NFC enabled payments through their smartphone instead of the physical card through the mobile application. 

While HCE and tokenised card payments may involve multi stakeholder discussions in order to be realised, even without such payment options, the importance of creating a transit application is not diminished as it provides a much needed user experience layer within the transit ecosystem. 

Another vital component in the establishment of the mobile transit application is the creation of a dedicated digital wallet for each user. Much like industry-standard wallet solutions, this wallet can be funded using local bank accounts or debit and credit cards and other channels. Once topped up, users can make payments for their bus and train rides directly through the app. The application can generate a dynamic QR code linked to the user’s wallet, which can be scanned at SoftPOS terminals to complete the transaction. 

And once again with the appropriate integrations and business agreements, NFC based Tap to Pay can be enabled through the tokenisation of the wallet to create a virtual card, thus bringing the state-of-the-art payment technologies into the Sri Lankan transit ecosystem. 

Bridging the cash gap – Third phase

Another vital step that must be addressed to enable the widespread adoption of this ecosystem is the inclusion of payment options beyond conventional digital methods. This is particularly important given the current realities of the Sri Lankan economy, where cash remains the predominant mode of transaction for a significant portion of the population.

To address this, and to simultaneously support the broader transition toward a less cash-dependent society, it is crucial to establish physical touchpoints such as agent networks and kiosks where customers can exchange cash to top up their transit wallets. These outlets would serve as access points for users who may not be utilising bank cards, effectively bridging the gap between cash and digital systems.

However as mentioned many times during this thought piece, introducing such a network of agents and kiosks would be a large infrastructure investment. Which is why this is taken as the final phase of the transit initiative, as starting with this step will be setting up the system to get stagnated in its initial implementation phase due to the complexity, and the operational costs associated with establishing such agent/kiosk networks. And I do believe such a network must be only deployed within rural regions of the island nation, where access to banking resources and digital infrastructures are strictly limited. 

And over time, as digital payment options become more widely adopted and trusted, the reliance on cash-based intermediaries is likely to diminish. However, until that inflection point is reached, the reality of cash must not be ignored. 

As such the most pragmatic approach is to allow agent networks to serve as on-ramps into the digital system, enabling users to fund their wallets with cash and use those topped-up balances to complete transactions within the transit ecosystem, thereby removing the need for the transit system itself to handle cash directly and deal with the associated challenges of tracking, reconciliation and settlement. 

Conclusion

And as such a three-pronged implementation lifecycle offers a practical foundation for addressing the complex challenges of Sri Lanka’s transit system. While this proposal may not be without its limitations, I hope it contributes a meaningful perspective to the broader conversation around developing a national digital transit framework.

Because I firmly believe that the modernisation of Sri Lanka’s transit payment landscape is not merely a matter of technology, it is a question of inclusion, efficiency, and long-term sustainability. By leveraging existing financial infrastructure, adopting scalable technologies like SoftPOS, and creating a comprehensive mobile experience, the country can design a future-ready transit ecosystem that is open-loop, interoperable, and tailored to its unique challenges.

Although implementation challenges remain, the long-term benefits significantly outweigh the initial hurdles. Through coordinated collaboration between financial institutions, transport authorities, technology providers, and regulatory bodies, Sri Lanka can establish a seamless, secure, and scalable digital payment ecosystem for transit, one that is built to endure and evolve.

(The writer is an independent writer focused on FinTech, Digital Banking, Payments, RegTech, and broader trends in Financial Innovation and Technology. He can be reached at [email protected].)