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Saturday October 1st, 2022

Is Sri Lanka poised for a fintech boom post covid-19?

Rohitha Perera, Founder and CEO of Crossborder Payments, says Sri Lanka is ready to become the regional hotbed for tech innovation and disruption.

The Cambridge Centre for Alternative Finance (CCAF) in 2020 partnered with the World Bank Group and the World Economic Forum to conceptualize, design and deliver the Global Covid-19 Fintech Market Rapid Assessment Report. The study found that although the global Fintech industry is growing amid the pandemic, there are varied results across geographies and verticals.

Bryan Zhang, Co-Founder and Executive Director, Cambridge Centre for Alternative Finance, and Tania Ziegler, Lead in Global Benchmarking, Cambridge Centre for Alternative Finance, had this to say in their foreword to the report:

Covid-19 has profoundly impacted financial systems across the world, including the provision of digital financial services and the functioning of Fintech markets. Recent anecdotal evidence suggests that the socio-economic shocks associated with the global pandemic have severely disrupted some Fintech sectors, created opportunities to others and introduced a state of flux for many.

“As one of the largest empirical studies on Fintech to date, this research finds that in spite of unparalleled levels of uncertainty and rapid changes in market conditions, the global Fintech industry as a whole has been largely resilient in responding to Covid-19. The evidence also reveals uneven performance of Fintechs across verticals and geographies, and a need for more regulatory and policy support as market consolidation continues and acute challenges remain”.

Matthew Blake, Head of Financial and Monetary Systems, World Economic Forum states: “Many Fintech firms have experienced their first significant bout of economic uncertainty as a result of the COVID-19 pandemic. This research collaboration, launched in the spring of 2020 when the global pandemic was rapidly accelerating, moved quickly to grasp the challenges for Fintechs as well as the solutions these nimble businesses could potentially provide to the public.

“Specifically, the group looked at the impact of the pandemic on global Fintech markets, the response of the Fintech industry to COVID-19 and the immediate regulatory and policy implications arising from the economic volatility related to the pandemic”.

In another report also by the World Bank and the Cambridge Centre for Alternative Finance – the Global Covid-19 Fintech Regulatory Rapid Assessment Study – regulators observed strong increases in the use or offering of many fintech products and services since the outbreak of the pandemic; in particular digital payments and remittances (60% of respondents reporting an increase), digital banks (22%), and digital savings or deposits (19%).

The report also said that the regulators in emerging markets and developing economies are more likely to have reported increases in the usage of digital payments and digital banks. In advanced economies, there is evidence of an increase in the usage or offering of InsurTech and WealthTech (both reported as a 24% increase).

In 2018, the Central Bank of Sri Lanka (CBSL) introduced LankaQR as a national QR code standard for payments and the CBSL recently decided to mandate the LankaQR Code for all licensed banks, licensed finance companies, and licensed operators of mobile phonebased e-money systems that offer QR code-based payment solutions. This follows the remarkable growth shown by digital transactions in Sri Lanka during April and May 2020 when many parts of the country were in lockdown.

It is in this backdrop that Sri Lanka recently launched a digital banking service and an e-commerce platform approved by the Central Bank of Sri Lanka to integrate digital payments, loyalty linked with a payment system in real time for earn and burn, e-commerce and booking services enabled by the LankaQR Code.

According to Rohitha Perera, Founder and CEO of Crossborder Payments, the company which launched the new platform, Sri Lanka is well poised to become the regional (South Asia) hotbed for tech innovation and disruption. He says that Sri Lanka has often led in tech adoption in the region from starting with the commercial use of the internet in 1995 and providing online banking from 2000 onwards. The Global Covid-19 FinTech Regulatory Rapid Assessment Study also found that Respondents see rising risks in the FinTech market concerning cybersecurity (78% referencing as a top three risk), operational risks (54%), consumer protection (27%) and fraud and scams (18%). Ninety percent of surveyed regulators from advanced economies see cybersecurity as one of their top three increasing risks associated with FinTech activities due to Covid-19.

Perera believes that the cultural aspects of Sri Lanka’s consumer and merchant needs and wants, would be better understood through the new digital banking services and e-commerce platform.