With digitization increasingly being seen as a key business strategy in recent years, numerous industries are now learning to embrace technology and apply innovation to their traditional business models. The financial services sector is one such example that has seen digital transformation in recent times.
In an exclusive interview with the Indian digital platform FinBizness, Dilshan Rodrigo – COO of Hatton National Bank Sri Lanka – shares his thoughts on the emergence & potential growth of FinTech in Sri Lanka and innovative financial products in the country.
What is FinTech?
Short for Financial Technology, FinTech refers to the usage of innovation & technology to enhance financial services & processes. This rapidly growing industry aims to compete with traditional financial models in the delivery of financial services – to enhance business operations and also to provide better value to consumers.
While some of the first applications of FinTech date all the way back to the introduction of ATMs decades ago, some of the more modern applications of FinTech include online lending, mobile payments, cryptocurrency, automated investment apps and crowdfunding platforms.
Given its popularity across the globe, FinTech is currently considered to be one of the fastest growing areas for venture capitalists, with it being expected to reshape the financial services landscape and the financial system in the years to come.
How Has the Sri Lankan Market Adapted to FinTech?
Dilshan Rodrigo – COO of Hatton National Bank Sri Lanka – states the initial challenge of introducing FinTech products to the Sri Lankan market was first faced by the telecommunication industry when they introduced digital wallet products that offered customers a wide range of payment options. The challenge that they faced was how they could communicate the message that the new product that they were offering was on par with a banking solution.
He says that banks and other financial services have capitalised on this initial drive and have now adopted similar strategies to garner interest amongst the public with regard to FinTech products. In addition to digital wallets, other FinTech products that were being introduced included lending platforms – such as LoanMe – as well as those in the payments space and the traditional banking space.
How Has Traditional Banking Reacted to FinTech?
The banking sector plays a dominant role in the overall financial services sector in Sri Lanka, with a majority of the market share being held by just eight banks in the country – thus forming an oligopoly. Digitization now offers the opportunity to truly penetrate the unbanked and underbanked populations of the country, which is a huge priority on the agenda of banks & the financial services sector.
Dilshan states that given the numerous players entering the FinTech space over the last few years, traditional banks have had no option but to embrace FinTech, in order to stay abreast of competition. He says that instead of simply viewing it as a threat, it was viewed as an important initiative and an opportunity to collaborate. Banks are now heavily investing in technology in terms of internet banking, mobile banking, wallet products as well as on infrastructure – such as centralization initiatives. The emergence of digital-only banks that provide banking facilities exclusively through digital platforms are also to be expected in the future.
He also states that regulators in Sri Lanka are very progressive and keen to support such efforts in the sphere of FinTech – primarily due to their goal of financial inclusion and reducing the informal economy. Embracing FinTech and supporting non-banks will ultimately help them reach out to the unbanked and underbanked population of the country, which is their overarching objective.
Given the vast resources, customer loyalty and brand value that most banks possess, Dilshan states that it is now crucial for banks to consider FinTech as an integral part of their business model and work towards providing value so that the hierarchical objectives of regulators & the country are achieved.
What Can Be Expected For FinTech in the Future?
In the country’s banking sector alone, Dilshan says that there currently are over a thousand FinTech products in Sri Lanka, including those that are operating at the moment as well as those that are about to commence operations. With the FinTech industry seeing a growth of around 30% to 40%, he predicts that this growth is a trend that can be expected to continue in the future.
The growth of FinTech in Sri Lanka has also led to many traditional banking & financial services business models to reinvent and embrace innovation – in order to be equally relevant in the industry. Due to changes in consumer behavior, Dilshan states that in the future, banking will no longer be considered merely a place, but seen as a lifestyle product in the eyes of the customer – as will other FinTech products in Sri Lanka.
LoanMe in Sri Lanka’s FinTech Industry
In Sri Lanka, LoanMe stands as an example of one of the country’s finest and most innovative FinTech platforms, providing quick and easy online loans via a platform that connects loan originators to those seeking short-term credit solutions. Having begun operations post COVID-19 in just August 2020, we have seen rapid growth over the last few months and are now expanding operations following the successful completion of a trial period. Our aim is to help customers acquire tailored short-term loans via innovation, state-of-the-art solutions and by ensuring a seamless user experience on our platform.