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Who will build the banks of tomorrow? Sri Lankan banks are in a position of strength - or so it appears. No big bank has failed and as a result they are trusted more than fintechs who wish to compete with them. Most people also don’t know what to make of fintechs or how to use them. However banks are also failing to harness the opportunity that digital technology now presents. Many bankers seem convinced that onerous regulations would protect them from the challenge and that regulators, fearful of competition destabilising the sector, will make it difficult for fintechs to gain significant market share. This has left Sri Lankan retail banks behind in innovation compared to ones in parts of Asia and Europe where regulators have allowed fintechs and tech giants to compete. Bankers fear competition and regulators its destabilising effect, because incumbent banks will lose their footing on customer data and relationships. Once their sole possession and advantage, customer data and relationships will become fair game for fintechs and big tech firms which, unlike banks, will operate a balance-sheet-light business model, earning revenue not by recycling deposits into new loans, but by offering services. Fintechs and bigtech will spend heavily on data analytics to understand customer spending to cross-sell more effectively. Few would have bet on state controlled People’s Bank emerging as a leader in digital banking. Nothing about People’s Bank’s position today suggests that it has won out on innovation, but a product's success is adoption and People’s Bank’s apps and online banking are successful by this measure. Banks in the future will create more value from data. People’s Bank, one of the country’s oldest, is surprisingly up to the challenge.

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