Colombo-based driver Abeywickrama Palliyawadha has a bank account at Commercial Bank of Ceylon, one of Sri Lanka’s biggest banks. He uses ATMs, but is otherwise reluctant to use the bank’s technology.
As he drove this Asiamoney reporter around Sri Lanka, he chatted amiably, admitting that he doesn’t use banking apps and doesn’t even have a credit card. For Palliyawadha, it’s a security issue. He lost most of his funds in a poor business venture about seven years ago; now he’s cautious with his money.
Palliyawadha is not unusual when it comes to his banking habits. Larnard, a tuk tuk driver in Colombo, does not have a bank account, instead relying on his daughter, a Commercial Bank of Ceylon customer, to bank for him. He is fairly sure she does not use her mobile phone for banking either.
Sri Lanka’s bankers will tell you that these are typical cases.
Sri Lankans have been slow to adopt financial technology: they appear happy to wait in line at a bank, using the time that could be saved with an app or online platform to catch up with neighbours and chat.
While so-called millennials may be the quickest to adopt technology, much like in the rest of the world, they too are concerned about the security of digital banking.
Some 78% of Sri Lankans between the ages of 15 and 65 own mobile phones, yet only about 37% of them have ever used the internet, according to a survey from think tank LIRNEasia. Of those that don’t use the web, 61% say they don’t know what it is.
Sri Lankans have the highest concern among those surveyed in south and southeast Asia when it comes to the risks of mobile and internet use, including the fear that private information can be seen by others.
The lack of security around privacy was a bigger concern for those with below-average or no income, versus those with above-average income. Likewise, the older the respondents, the greater the level of worry.
These factors contribute to the slow adoption of mobile and online banking. But others think that banks are blaming customers – and the regulators – rather than admitting their own failings.
The Sri Lankan banks haven’t come up with digital journeys or products for people to use. It's not the end-customer issue. We’re not providing what they want- Deepal Akuretiyagama, NDB Bank
“Everyone says [it’s the] central bank issues, [and] customers aren’t ready,” says Deepal Akuretiyagama, chief operating officer of NDB Bank, of Sri Lanka’s slow digital adoption. But these aren’t the biggest hurdles for Sri Lanka, he says.
“The banks are always covering up with the regulatory issues,” he adds. “The Sri Lankan banks haven’t come up with digital journeys or products for people to use. It’s not the end-customer issue. We’re not providing what they want.”
Sanjaya Perera, senior vice-president for personal banking and branch network management at NDB, agrees: “It’s how you structure products. The banks tend to copy the products the other banks have.”
That approach has created a plethora of payments options, but few innovations.
“The payments side of things seems saturated,” says Nuzhi Meyen, co-founder of Helios, Sri Lanka’s first peer-to-peer lending and alternative finance platform, which was set up in 2018.
He argues that other areas need more attention.
“The banks have dominated the financial space in Sri Lanka,” Meyen says. But “there’s been little onus on the banks. They haven’t had to innovate… they’ve been comfortable.”
There are basic problems with some of the digital offerings, Meyen says. For instance, digital platforms and mobile apps often use English, rather than Sinhala and Tamil, the main local languages.
English is easier for developing the technology, but using local languages would pay dividends, he says, although he admits his business hasn’t taken up the challenge.
You can see the big banks are struggling right now. They didn’t have their homework in place when they began to grow- Deepal Akuretiyagama, NDB Bank
Last year, DFCC Bank relaunched its website, designing it to be mobile-first. New features were added, including an integrated chatbot, online account opening and calculators for leases, fixed deposits and credit card payments.
People’s Bank now has a retail loan platform that cuts down on the manual processing of loan applications, eliminating the need for a number of physical documents and speeding up the processing time.
Dimantha Seneviratne, NDB Bank
The bank plans to implement a digital signature function this year, to make lending entirely paperless.
At NDB, which has more than SLR500 billion ($2.7 billion) in total assets, customers can see all of their accounts at the bank on one app. The app, launched in December 2019, allows customers to set up face and fingerprint identification. By the end of 2019, 11 million transactions had been done through NDB’s digital channels during the whole year, versus 5.3 million transactions done manually.
“You can see the big banks are struggling right now,” says Akuretiyagama. “They didn’t have their homework in place when they began to grow.”
NDB has positioned itself to build off others’ digital banking experiences. Both Dimantha Seneviratne, NDB’s chief executive, and Akuretiyagama came from HSBC, in 2014 and 2018 respectively, with the institutional knowledge of the international bank.
“We are 100% sure we will not make the same mistakes the big banks did,” says Akuretiyagama.
That’s not to say there has been no growth at all. It just hasn’t been as dramatic as hoped.
Commercial Bank of Ceylon’s online banking for retail and corporate clients has grown from 280,600 users in 2018 to 630,000 in 2019. Chief executive Sivakrishnarajah Renganathan says the bank can provide about 90% of the products and services that retail customers need through online banking.
In the next two to three years, he expects about 40% of the bank’s clients to use digital banking.
The bank’s digital bank account, Flash, was launched in 2018. In 2019, it launched JustPay, a facility that links all the other bank accounts of the Flash account holder and allows payments from any of the holder’s bank accounts. Flash was also updated last year to be multilingual, using English, Sinhala and Tamil.
But no matter how whizzy the digital offering, Sri Lanka lacks the infrastructure to push the revolution far and fast. For instance, the core banking infrastructure doesn’t support real-time confirmations, says Akuretiyagama.
Although authorities have responded with suitable initiatives, they are often slow to take off, says Meyen.
“When something gets bad press in another country… [the central bank] might be a little apprehensive,” he says.
The central bank, which did not respond to requests for comment, appears to be pursuing financial technology changes on several fronts. For example, it has established a fintech sandbox and is seeking applicants.
At the end of 2019, the central bank also asked for applications to develop a blockchain-based know-your-customer (KYC) platform. Banks expect it to be up and running as soon as the end of 2020.
The platform could knock down one of the biggest hurdles for the banks: the need for paper documentation. Even if Sri Lanka’s banks have implemented digital onboarding, loan applications and other practices, they still have to print physical documentation for the regulators.
Cutting down on the need for paper would be a boon all around, says Renganathan. For instance, Commercial Bank has machines that allow customers to deposit money without the need for multiple paper documents for verification. But regulators still require printed documents for deposits over a certain amount, or those made by third parties, he says.
“The central bank as a regulator is taking a lot of positive steps,” Renganathan says. “They’re more keen to get into digital platforms, but at the same time they’re keen to ensure the safety and security of customers. So there is a bit of time being taken for those purposes.”
The central bank is also looking into open banking in Sri Lanka, allowing third parties to access customers’ financial data, with permission. The technology is expected to encourage competition and give users easier access to their financial data through platforms of their choosing.
The central bank will consider developing a framework for open banking after the early April deadline for stakeholder feedback.
While many are optimistic about Sri Lanka’s future, there’s still a healthy dose of scepticism about how quickly the country will be able to change.
NDB’s Akuretiyagama notes that the conversation has gone on for several years already.
Encouraging customers such as Palliyawadha to join the digital revolution won’t be easy.