Why People’s Bank is Sri Lanka’s ‘best digital bank’

Ranjith Kodituwakku, Chief Executive Officer and General Manager at People’s Bank


People’s Bank launched an ambitious digitalisation drive in 2016. Four years on, the bank won the crown of ‘Best Digital Bank in Sri Lanka’ at the prestigious Asiamoney Best Bank Awards 2020. But, for Ranjith Kodituwakku, Chief Executive Officer and General Manager at People’s Bank, the journey began six decades ago. In this interview, Kodituwakku explains how digitalisation is an extension of the bank’s founding mission to drive rural economic growth. He talks about the many digital initiatives and their impact, and how covid-19 is affecting the banking sector.

Excerpts of the interview are as follows:

People’s Bank is on an aggressive drive to become Sri Lanka’s most digitalised bank? How has the journey been so far?

Kodituwakku: The bank’s founding mandate in 1961 is to improve financial inclusivity in the country. Back then, banks tended to serve an elitist clientele based in Colombo and other big cities. People’s Bank’s mandate was to take commercial banking to the rural economy and develop cooperative societies, farming, and small and medium enterprises. After setting up headquarters in Colombo, the bank opened its first eight branches outside the Western Province including Jaffna, Matale and Anuradhapura. We were the first to issue cheques in Sinhala and Tamil and introduced special rural credit schemes to boost production and drive consumption.

Our consumer credit products reached a wide range of people from farmers, teachers, healthcare professionals, and entrepreneurs that lived in rural areas. As the islandwide branch network expanded we had to computerise operations to better serve a widely disbursed customer base. People’s Bank was the first to computerise banking in this country and started automating processes in the early 1980s. The next decade saw the bank growing its ATM network and by 2004 People’s Bank deployed a core banking system which connected every branch and every function. We did all this because we remained committed to our founding mission to improve financial P inclusivity and drive economic growth in rural Sri Lanka, while becoming a successful commercial bank servicing from micro finance customer to the top corporate client. This brings us to where we are in this journey, the natural next step: digitalisation. In 2016, we conceived and actioned a strategy to become the most digitalised bank in the country by 2020.

 Why is digitalisation so important to the bank?

Kodituwakku: Digitalisation is a buzz word these days, but at People’s Bank, the motivation is different. Digital technology is disrupting every industry worldwide, including banking. Consumers are not only looking for convenience, but they also want unique experiences and care about sustainability and consume in ways that reflect their lifestyle choices. Banks need to digitalise to stay relevant.

Digital tech can help banks meet business KPIs, navigate complex regulations also improve process efficiencies that can lead to significant cost savings and better bottomlines. We have all these objectives in mind at People’s Bank. However, our main goal is improving financial inclusivity. For instance, our digital services are still free of charge.

There is plenty of room to monetise some of our digital banking services to recover heavy investments faster, but we are not doing that. We need to be the catalyst for a digital rural economy, and this means people and businesses need encouragement to take up our digital services.

Digital banking will overtake conventional banking over the next five years, and we at People’s Bank are ready for it. We will be able to focus more on value-added services such as evaluating and processing loans, advisory services, investment banking, and wealth management. Onboarding customers, providing unique and engaging experiences will be seamless then as well. We have progressed well since launching our digitalisation drive four years ago and the bank has earned many global accolades along the way. Recently, the coveted Asiamoney Best Bank Awards 2020 crowned People’s Bank the ‘Best Digital Bank’ in Sri Lanka.

Can you take us through some of your digital initiatives?

 Kodituwakku: Let me give you a few examples. But keep in mind, we are not building standalone systems or apps. People’s Bank has invested more than Rs2 billion on technology and we are building a single digital integrated banking system which connects all our functions and processes, and customer interfaces such as web and mobile apps.

We are developing the entire infrastructure including its critical components like governance, security, and risk management. We have a real-time customer onboarding platform called People’s Wiz, the first for any bank in Southeast Asia, Africa, and the Middle East. Since launching in 2017, People’s Wiz has onboarded over 785,000 customers.

It is a completely paperless process which can open multiple accounts, issue debit cards and activate mobile digital banking services like People’s Wave, our digital banking app. People’s Wiz has resulted in several time-and-cost savings. For instance, we have not recruited frontline staff for several years. Over 500,000 people use our digital banking app. and internet banking site, People’s Wave and People’s Web since its 2017 launch.

Our mobile banking app, People’s Wave, integrated to the core system, allows a customer to carry out over 50 different banking transactions in the comfort of their homes, without ever having to step into a branch. People’s Wave offers many features including balance inquiries of multiple accounts, loans and credit cards, transaction history, fund transfers to own or third-party People’s Bank or other bank accounts and set future-date transfers and standing orders.

The app also allows utility bill payments and transfers for insurance premiums and loans and leasing instalments. It also has options for favourite bill payment maintenance, inquiries of pawning articles including part payments and redemption. Customers can also manage SMS alerts, reset passwords, and register up to five devices and removal. The app also has a calculator for loan repayments and pension plans. People’s Wave turned out to be revolutionary becoming the most downloaded finance app in Sri Lanka with over 570,000 downloads since launching in 2018. It has an impressive 4.3 rating on Google Play Store. I believe the app is making a significant contribution to the bank’s mission to drive financial inclusivity with over 70% of active People’s Wave users outside the Western Province.

We launched People’s Corporate Web and Wyn for businesses who have different banking needs. This is an internet and mobile banking application where businesses can authorize and approve corporate transactions such as transfers, payments, remittances, trade finance simply and securely anytime, anywhere in the world. Businesses can make corporate bill payments to various utility providers.

People’s Corporate Web and Wyn has additional features. Corporates can manage their payrolls, open letters of credit, and apply for guarantees and much more. Since its launch in 2018, over 4,500 businesses have activated People’s Corporate Web and Wyn. Corporate leaders can now focus more on their businesses. We also developed two loan origination systems, one for retail customers and the other for corporates, to cut processing times and reduce the bank’s paper consumption. A personal loan which took a week to process now takes a few hours. A home loan which requires several legal documentations is now approved in a day, whereas earlier it took two to three weeks.

The rolled out of the two loan origination systems across all People’ Bank branches is ongoing, the covid19 lockdowns caused a few delays in that front. At the operations level, we introduced a new fixed assets inventory system in 2019 to manage all fixed assets including maintenance of machines. We connected our entire branch network to this system, driving increased efficiency in fixed assets maintenance. Also, a vehicle tracking system using GPRS technology optimizes transport usage.

Your digital goals will win you many young techsavvy customers, but what about your less tech-savvy customers base, those who belong to the older demographic and those who live in rural areas? Kodituwakku: Early in our digitalisation drive, we realised that creating a virtual bank was not going to be enough. It had to be both visible and tangible to excite and compel people to activate internet banking and download our mobile apps. We are targeting Millennials and Zoomers (those in Gen-Z). But we also have a large customer base banking with us for several decades. We also have a large rural customer base. Over 70% of our customers live outside the more affluent Western Province. We had to show them what digital banking was all about.

It was imperative to prove that our digital ambitions are a continuation of the bank’s founding ideals. So, we built the physical infrastructure, reimagined our brand image, and improved our corporate colour schemes and logos to stand out and become more visible. This led us to set up self-banking units (SBUs). It was like banking in a box.

Around 80% of the transactions conducted inside a bank branch is now executed at these self-banking units. This was an important breakthrough and, soon, other banks followed our lead. The self-banking units helped our rural customer-base and those who are less tech-savvy realised the wonder, and potential, of digital banking.

This enabled the bank to increase the customer uptake of digital products. We have encouraging user numbers from rural places like Kilinochchi, Wanni and Galgamuwa to show that our digital drive is fostering financial inclusivity. The self-banking units reduced the customer footfall at the branches, saving time and helping staff focus more on customer service. Teller efficiency has increased by 50% in 2019 and marketing and cross-selling has picked up by 30%.

Also, as I mentioned earlier, we were able to realise significant staff-related costs because we no longer had to recruit. We also make sure our staff are familiar with digital products. The bank has invested over Rs100 million on training in 2019 including opportunities for overseas exposure. The number of hours on digital training increased in 2019 to 34,480 hours, up from 26,480 hours the previous year.

What is the impact of People’s Bank’s digitalisation journey so far?

 Kodituwakku: We have account relationships with 14 million people, so at a basic level, without a core-banking system, the bank cannot even hope to be viable as a business. Growth will be impossible because day-to-day operations would be too costly and run us to the ground. But with our digitalisation drive, we are finding cost savings, improving processes, automating repetitive functions, and onboarding more customers without needing to spend on branch expansion.

Future business expansion will not require new branches but will depend on how well we upgrade our core-banking system and digital platforms and rollout new process innovations. As a direct impact of digitalisation, we have seen improvements in earnings indicators. For instance, we reported a revenue of Rs11.59 million per employee in 2015, which nearly doubled to Rs21.35 million in 2019.

I should also say that we take pride in the fact that we have one of the highest female representation of 61% in the banking industry of Sri Lanka. It will take some time for us to realise investments in digital since we do not charge any fees at present unlike other banks, but we have KPIs to meet.

For instance, we, the bank, must halve costto-income ratios because of digital and we are on track to meet that goal. Having said that, we are reaping the fruits of our digital efforts. Let me share some data to show the impact of digital at People’s Bank. Over 85% of conventional banking transactions are not conducted by customers on our digital channels. The value of transactions through our mobile apps and internet banking doubled from a year earlier to Rs80 billion in 2019.

We average 25,000 monthly People’s Wave downloads each month and the app executes over 75,000 financial transactions each week. Digital deposits totalled Rs90 billion that year. Our self-banking units handled transactions totalling Rs82.3 billion and ATMs did Rs53 billion in 2019.

Our ATMs handle over 15 million transactions of non-People’s Bank customers each year. If I may add, our focus on sustainability has also resulted in a 79,806KWh reduction in energy consumption resulting in a saving of Rs2 million. We recycled 36 tonnes of paper, up from 18 tonnes the previous year, and we opened 403,242 new accounts without using any paper.

Serving the community is important to us People’s Bank and is core to our sustainability initiatives. In 2019, we invested Rs35.7 million on community development activities which is part of the bank’s CSR efforts in developing infrastructure, education, arts and culture and environmental sustainability projects. We also granted communitybased development loans totalling Rs8.5 billion that year. The obvious next steps in our digital strategy are deploying big data, machine learning and AI to develop unbeatable banking experiences for our customers.

How has covid-19 impacted People’s Bank?

Kodituwakku: The banking sector had a tough year even before the coronavirus lockdown. The terror attacks in Easter 2019 hit the economy hard. Nonperforming loans were rising, and banks reported declining profitability. Banking sector gross NPLs peaked at 4.7% in 2019, a five-year high and combined profits declined 11% to Rs112 billion, according to the Central Bank’s annual report for 2019. People’s Bank enjoyed consistent earnings growth before 2019.

We had good results for the first quarter ending March 2020. We reported a net profit of Rs4.3 billion rupees at the group level, which was an increase of 34% from a year earlier. This was despite net interest income growing a flat 1% to Rs18.7 billion. The loan book expanded 10%, twice the banking sector’s rate, to Rs1.6 trillion. The bank’s deposit base grew 6.2% to Rs1.7 trillion. Our war chest of retained earnings grew a healthy 4% to Rs73 billion.

We are well capitalised. All capital adequacy ratios exceed the regulator’s requirements. Gross non-performing loans were contained at 3.8% as at end-March 2020, up marginally from 3.7% as at end December 2019. NPLs over the banking sector was much higher at 5.1% of gross credit by March 2020. Covid-19 presents several challenges for banks.

Demand for credit is low and banks have also had to extend moratoriums and refinanced credit to help struggling businesses. People’s Bank views the ongoing challenges as an opportunity for the bank to live up to its ideals of inclusivity. During the lockdown, over 70% of branches and all self-banking units remained operational and our mobile banking units covered over 400 locations islandwide, including hard to access rural areas. These units facilitated withdrawals totalling over Rs200 million during the lockdown. Around Rs300 billion worth of loans took up the moratoriums but this is something the bank can absorb because our loan book is over Rs1.3 trillion.

We also provided credit relief to more than 400,000 retail customers. We are monitoring the situation; however, it is the relationships we share with our clients built over several decades and forged by a trust that will see us all through. We also disbursed over 5,000 working capital loans amounting to over Rs6 billion through the Central Bank’s refinanced credit relief scheme. Around 80% of these were rural SMEs. We launched the People’s Bank’s own credit relief scheme and allocated Rs15 billion for this. These loans at 6% are for SMEs in agriculture, IT, logistics, manufacturing, tea, and tourism. We launched two special loans schemes during this period.

One aimed at improving self-sufficient value chains across farming, fisheries, and animal husbandry. The other loan scheme will empower women entrepreneurs with micro and small-scale businesses. Interest margins may contract but then we expect a low-interest rate regime after the Central Bank cut policy rates twice since March. We reduced interest rates before anyone else to single-digit levels. This benefited our SMEs clients.

The Central Bank also reduced the banking Statutory Reserve Ratio which released a significant amount of liquidity leaving more room for lending. The reduction in lending rates will squeeze margins because we are conservative when it comes to reducing deposit rates. This is because senior citizens depend on interest income and we will not reduce deposit rates as sharply as some other banks. We will be able to contain interest margins at around 3%.

Non-performing loans which spiked after Easter attacks will remain at elevated levels until the end of the year, and then we will see a decline as economic activity picks up next year. It is still too early to know the full impact of Covid-19 on the economy. We expect earnings could decline by 40% in 2020 but we are optimistic the following year will bring a turnaround and growth. Despite the decline, profits will remain substantial. We have differed some capital and marketing expenditure, but the digitalisation drive will continue.