In an era where QR codes, tap-to-pay, and digital wallets dominate global commerce, Sri Lanka has seen a surprising twist. The Central Bank recently confirmed a striking 14.5% year-on-year increase in physical cash circulation, pushing the total to Rs. 1.36 trillion in 2024. That’s a jump from Rs. 1.19 trillion in 2023, and it’s the highest we’ve seen since the pandemic began.
For anyone watching the business climate closely, this isn’t just a statistical anomaly. It’s a window into how Sri Lankans are interacting with money, trust, and the formal economy at large. And for business owners, banks, and policymakers, it’s a wake-up call.
What’s Behind the Surge?
Let’s start by unpacking the reasons. First, the country is in a recovery phase. As the economy regains momentum after years of turbulence, consumer confidence is cautiously returning. People are spending again, especially during religious and cultural festivals that tend to see a spike in cash transactions. Whether it’s Avurudu shopping sprees or Vesak donations, cash remains the go-to method for many.
Another factor is the dominance of the informal economy. A significant chunk of Sri Lanka’s economic activity takes place outside formal, traceable systems. From small vendors to daily wage earners, cash is not just convenient; it’s essential. In many rural or semi-urban areas, cash is still king. Even in cities, there’s a preference for tangible money when dealing with services like transport, groceries, or rent.
Digital infrastructure is growing but still patchy. While platforms like LankaQR, mobile banking apps, and card payments are gaining ground, they haven’t yet replaced cash for the average person—especially older generations and those in underserved regions. Trust also plays a part. Many still prefer to keep their savings in hand rather than in digital wallets or accounts they may not fully understand.
For Businesses, a Mixed Bag of Implications
From a business perspective, the resurgence in cash isn’t all bad. In fact, for retailers and SMEs, especially outside Colombo, it’s a reminder of where the real customer behavior lies. Businesses that can adapt to this demand—with better cash handling systems, stronger physical security, and responsive customer service—stand to benefit.
At the same time, overreliance on cash poses risks. It complicates accounting, increases vulnerability to theft, and limits data-driven decision making. Businesses that deal largely in cash also find it harder to access credit, since they lack the digital transaction history banks often require.
So, companies must strike a balance. Continue to accept and manage cash efficiently, but also incentivize digital payments where possible. This might mean offering discounts for card payments or integrating easier mobile payment options at checkout.
What Does This Mean for the Financial Sector?
Banks and financial institutions are in an interesting position. On one hand, increased cash circulation boosts demand for ATM services, teller support, and physical bank branches. This might lead to a short-term uptick in retail banking activity. On the other hand, it highlights the urgent need to build trust and accessibility around digital platforms.
Financial literacy remains a major barrier. The average consumer may not fully grasp the security or benefits of digital banking. That’s where banks and fintech companies can step in, not just as service providers, but as educators and enablers.
There’s also an opportunity here to expand digital payment systems more aggressively. The surge in cash is a sign that while the appetite for spending is back, the infrastructure to support non-cash alternatives isn’t fully there yet. This is a market waiting to be tapped.
A Broader Economic Reflection
Zooming out, the increase in cash in circulation tells a deeper story about Sri Lanka’s socio-economic fabric. It suggests resilience. People are participating in the economy again. They’re buying, saving, and transacting in ways that feel safe and familiar.
But it also suggests a need for more inclusive growth. The uneven uptake of digital tools is partly due to infrastructure gaps, but also education and affordability. A true digital transformation can only happen when it’s accessible and relevant to every segment of society.
Tax enforcement is another area where high cash usage complicates things. Cash transactions are harder to trace, potentially allowing more income to slip under the radar. As the government looks to improve fiscal management, encouraging digital payments may also be a strategy for tightening compliance.
The Road Ahead: What Can Be Done?
For businesses, the answer lies in hybrid readiness. Don’t ignore cash, but don’t depend on it exclusively either. Build your systems to handle both smoothly. This might mean investing in POS machines, working closely with banks, or even partnering with fintech startups to create location-specific solutions.
For the state, the rise in cash usage is a signal to improve digital infrastructure—not just in urban hubs, but across provinces. Investments in mobile network coverage, affordable data packages, and public awareness campaigns can help bring more people into the formal financial system.
Meanwhile, consumer-facing platforms must think creatively. Can mobile apps be made more intuitive for first-time users? Can businesses introduce payment kiosks that don’t rely on smartphones? Can financial services offer hybrid savings models that include both digital wallets and physical cash deposits?
Final Thoughts
The cash comeback in Sri Lanka is not a step backward. It’s a reflection of how people are choosing to interact with a recovering economy. For now, businesses and policymakers need to meet them where they are—with a practical, inclusive approach that blends cash and digital tools.
By staying agile and responsive, Sri Lanka’s businesses can navigate this transitional phase effectively, unlocking both trust and growth along the way.
