Is GovPay going to be Sri Lanka’s digital leap amidst economic crisis?

Sri Lanka faced an unprecedented economic crisis in 2022, marked by soaring inflation, shortages of essential goods, and a decline in foreign currency reserves.

The island nation suffered lengthy periods of black outs, food shortages, fuel insufficiency and spiralling inflation. However, in the face of economic crises, the country showed resilience to pick up the pace on its digital transformation.

A digital leap?

Sri Lanka has taken a digital leap with the official launch of three major initiatives aimed at modernising government services.

Under the leadership of President Anura Kumara Dissanayake, the country introduced GovPay, a centralised government digital payment platform, the decentralisation of the President’s Fund to improve accessibility at Divisional Secretariats, and the eBMD System, which allows Sri Lankans abroad to obtain birth, marriage, and death certificates through embassies.

These initiatives mark a milestone in Sri Lanka’s ongoing efforts to streamline public services, enhance accessibility, and promote transparency through digitalisation.

GovPay stands at the centre of Sri Lanka’s digital transformation initiatives, offering a streamlined platform for government-related transactions.

Initially rolled out across 16 government institutions, the system is set for rapid expansion - with an additional 30 entities expected to integrate by April 2025.

Backed by 12 state and private banks, GovPay is designed to enhance efficiency, security, and accessibility in public service payments.

By reducing bureaucratic delays and centralising transactions, the platform seeks to bridge the gap between citizens and government services, fostering a more responsive and accountable governance framework.

Developed with a collaborative endeavour involving the Ministry of Digital Economy, the Information and Communication Technology Agency (ICTA), and LankaPay, and under the oversight of the Central Bank of Sri Lanka (CBSL), GovPay aligns with broader efforts to modernise revenue collection and promote digital governance.

As a centralised payment gateway, it functions as a "Citizen’s One-Stop Shop" for both individuals and businesses, ensuring transparency and ease of access in financial dealings with the state.

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Shift towards data driven governance

More than a payment tool, GovPay represents a critical shift towards a data-driven governance model, where digital infrastructure plays a defining role in improving state-citizen interactions and driving long-term economic efficiency.

Deputy Minister of Digital Economy, Eranga Weeraratne has emphasised that reliance on cash transactions imposes a significant economic burden, costing nearly 1.5 per cent of the annual GDP, while also exacerbating fraud, corruption, and inefficiencies within payment systems.

The government plans to mandate the digitalisation of all payments to state institutions, aligning with broader efforts to enhance financial transparency and operational efficiency.

This policy shift not only strengthens GovPay’s role as the backbone of Sri Lanka’s e-governance strategy but also signals a decisive move towards a cashless economy - fostering greater fiscal accountability.

A crucial aspect of this transition is GovPay’s deep integration with Sri Lanka’s financial ecosystem, ensuring broad accessibility and security in digital transactions.

12 leading commercial banks, including Bank of Ceylon, Cargills Bank, Commercial Bank, DFCC Bank, Hatton National Bank, National Savings Bank, NDB Bank, NTB Bank, Pan Asia Bank, Peoples Bank, Sampath Bank, and Seylan Bank, have joined the platform to facilitate seamless government payments.

In addition, fintech applications like HelaPay and iPay have been incorporated, expanding digital payment options and further reducing reliance on cash.

By leveraging both traditional banking infrastructure and fintech innovation, GovPay not only streamlines financial transactions but also enhances cybersecurity and minimises fraud risks.

This multi-layered approach reinforces the government’s commitment to fostering a more transparent, efficient, and resilient digital economy.

The broader digital government strategy

Govpay is part of Sri Lanka's broader digital government strategy, which includes the Sri Lanka Unique Digital Identification (SL-UDI) initiative.

The SL-UDI aims to provide every citizen with a unique digital identity, which will transform how digital interactions and transactions are conducted.

As the world moves towards Digital Public Infrastructure (DPI) enablement, countries are increasingly investing in secure, interoperable, and scalable digital ecosystems to enhance governance, financial inclusion, and service delivery.

From India’s Unified Payments Interface (UPI) and Aadhaar-based identity systems to Estonia’s X-Road e-governance framework, nations are leveraging technology-driven solutions to create more efficient and transparent public services.

Sri Lanka’s GovPay aligns with this global trend, aiming to digitise government transactions, reduce reliance on cash, and minimise fraud risks while enhancing accessibility for citizens and businesses alike.

A significant development in this context is the advancement of the Sri Lanka Unique Digital Identity (SL-UDI) project, which seeks to digitise the country's standard identification system.

The government has recently procured 350 units of biometric hardware, including high-resolution cameras and fingerprint scanners, to facilitate this transition.

The integration of biometric authentication within the SL-UDI project is directly linked to the country’s Digital Public Infrastructure, as it provides a secure and reliable method for identity verification across various digital platforms, including GovPay.

By ensuring that each transaction is linked to a unique digital identity, the system enhances security, reduces the risk of fraud, and streamlines access to government services.

Cybersecurity risks

However, as DPI adoption accelerates, so do cybersecurity risks. Ensuring data privacy and preventing unauthorised access are critical to maintaining public trust in these digital systems.

Therefore, as Sri Lanka progresses GovPay, which integrates 12 commercial banks and fintech applications, represents a critical node in Sri Lanka’s financial infrastructure.

Without a robust cybersecurity strategy, vulnerabilities in identity verification, transaction security, and data governance could expose the system to fraud, unauthorised access, and large-scale cyber threats.

Ensuring GovPay's security, therefore, is not just a technical requirement but a fundamental pillar of digital trust in Sri Lanka’s DPI framework.

GovPay vs. Asia’s leading digital payment platforms

Several Asian countries have implemented government payment platforms similar to GovPay. The APAC region is leading the way in real-time payments, with countries like China, India, and Singapore at the forefront of this trend. See below.

While these platforms share similarities with GovPay in terms of their objective to streamline government payments, they differ in their features, functionalities, and levels of adoption.

For example, UPI in India has achieved significant scale and interoperability, while PayNow in Singapore focuses on P2P transfers.

Govpay in Sri Lanka is still in its early stages of adoption but has the potential to play a significant role in the country's economic recovery and digital transformation.

Keeping the GovPay momentum

To sustain GovPay’s momentum and long-term success, the Government of Sri Lanka must consider cybersecurity and data protection, regulatory strengthening, and public adoption, inter alia, as key factors in measuring its effectiveness.

1.  Enforce Stronger Cybersecurity and Data Protection Laws

As GovPay expands, it becomes a prime target for cyber threats. Sri Lanka must ensure full enforcement of the Personal Data Protection Act (PDPA) and develop a dedicated cybersecurity policy for digital payments. Multi-factor authentication (MFA), real-time fraud detection using AI, and end-to-end encryption should be mandatory across all transactions. The Central Bank of Sri Lanka (CBSL) must also require periodic security audits to mitigate risks and avoid any kind of fraudulent activity.

2. Strengthen Regulatory Oversight and Fintech Integration

To prevent misuse and ensure compliance, Sri Lanka needs a fintech regulatory framework tailored for GovPay. A regulatory sandbox under CBSL should allow controlled testing of new payment innovations, cross-border transactions, and digital lending without compromising security. Additionally, GovPay must integrate with the Sri Lanka Unique Digital Identity (SL-UDI) for secure authentication and fraud prevention.

3. Drive Public Adoption and Financial Inclusion

For GovPay to succeed, digital payments must be accessible and trusted by all segments of society.

A nationwide financial literacy campaign should educate citizens on digital transactions, fraud prevention, and the benefits of GovPay.

The government should also incentivise adoption by offering tax rebates or lower transaction fees for businesses using GovPay. To expand financial inclusion, GovPay should integrate mobile wallets and microfinance institutions to reach unbanked populations.

In crux, the Sri Lankan economic crisis provides a valuable case study for understanding the challenges and opportunities for government payment platforms in the context of economic crises.

GovPay's experience demonstrates the importance of robust and adaptable digital payment systems in mitigating the negative impacts of economic shocks and supporting government initiatives to restore stability through digital means.

In terms of potential risks and challenges, policymakers and stakeholders should put their bets on long-term success hinges like robust cybersecurity, strong regulatory oversight, and widespread public adoption.

This will not only pave the way for a widely adopted GovPay but will also modernise public financial services and position Sri Lanka as a regional leader in digital governance.

Mohammad J. Sear, who is a guest writer for GovInsider, is a digital futurist and thought leader with over 25 years of experience advising governments and organisations globally on digital transformation. His expertise spans 12+ years in the UK government (under Thatcher, Major, and Blair) and current leadership of digital government and startup practices for a global consultancy in the MENA region. He recently published a book called "Becoming Digital Nations – reimagining countries for the digital era."