Sri Lanka’s Resilient Answer to Economic Crisis Unfolds through Fintech Triumph
Sri Lanka’s stable and adaptive payment infrastructure offers insights to the resiliency of the country’s financial technology sector and demand for such services despite economic shocks.
New analysis from Robocash observes the staggering surge of retail digital transactions, which doubled over the last two years, reaching a substantial $31 billion by Q2 2023, an exceptional 94% increase from Q2 2021.
Sri Lanka’s payment infrastructure, inclusive of the Real Time Gross Settlement System (RTGS) and Retail Payment Systems (RPS), forms the backbone for digital transactions. Despite occasional downturns, notably during the height of the COVID-19 pandemic in Q2 2020, stability remains a hallmark, with retail digital payments resilient throughout other crises.
Robocash observes that the pandemic-related responses spurred fintech development. The 94% surge in retail digital transactions between Q2 2021 and Q2 2023 was primarily driven by the exponential growth of CEFTS and Internet payments, which was propelled by measures like restricting electronic accounts per individual, establishing uniform standards for mobile payment apps, and reducing fees.
Examining Tracxn data (as of 09/11/2023), the number of active fintech companies in the country is 473 (311 in 2018 and 113 in 2013). At the moment, 69.1% of the entire market is occupied by players from the E-Commerce sectors (167 — 35.3%) and Business management[1] (160 — 33.8%).
From the point of view of attracting investments for the development of the industry, Sri Lanka’s fintechs were able to attract only $7.5 million, of which $5.34 million was directed to the E-Commerce sector. Also, it is worth noting that 77% of investments were realized before 2019, signaling further opportunities for development.
Considering Sri Lanka being clearly dominated by the service sector (making up 56.1% of its GDP in 2022), the country has a high economic potential to enter the list of developed countries in the coming decades, which requires additional domestic production. Its reliance on tourism income and its symbiotic relationship with the national payment infrastructure have amplified the country’s focus on digital payments. The convergence of crises economic, political, and pandemic-induced—fostered an environment ripe for fintech evolution.
“Amidst adversity, Sri Lanka’s fintech sector has emerged as a beacon of resilience. The convergence of crises propelled the nation towards embracing digital solutions, transforming consumer behavior, and accelerating fintech growth,” remarked Mr. Konstantin Bereutsyn, Country Manager of Robocash Sri Lanka. “The surge in retail digital payments is a testament to the nation’s adaptability and the burgeoning potential within the fintech ecosystem. This remarkable growth is just the beginning of Sri Lanka’s transformative journey.”
[1] HRTech, MarketingTech, Finance & Accounting Tech, Cybersecurity.
