Importance of Fintech, payments mechanism and  Human Capital in the Banking sector in Sri Lanka

With the advent of financial services based on revolutionary technology, the entire financial sector began to restructure to meet the increasing demand for financial services from various business entities around the world. By definition, "financial technology (Fintech) is theoretically part of the process of evolving financial innovations that are risky but valuable" (Thakor, 2012). Research by Chen et al., (2019) recently revealed that these services provide significant value to investors. According to a report by the Financial Stability Board (BIS) of the Bank for International Arbitration (BIS) (2017), Fintech is “a technology-enabled financial innovation that can have a positive material impact on new business models, applications, processes or finances. Providing markets and institutions, and financial institutions ". Using these definitions, researchers have defined Fintech products and services under four categories, namely (i) loan deposit and capital enhancement services, (ii) payment, clearance and settlement services; (iii) Investment Management Services and (iv) Insurance (Pilkinton, 2016) Fintech benefits from promoting higher financial inclusion and reducing poverty among less privileged communities Fintech products and services are excluded from regular financial institutions and financial systems However, critics have argued that these innovators disrupted traditional financial 

intermediary services, driving customers away from those institutions and removing customers and organizations from their existing financial relationships (GSMA 2015; PricewaterhouseCoopers, 2015). New technologies such as Low Energy, QR codes and field close communication improve the ease of operation and reduce the cost of banking transactions, making it the traditional player in the market Sabotages. However, some have emphasized that these innovations add other layers to the system (Lin, 2015). Some researchers have suggested that the 2008 global financial crisis (Blaseg and Koetter, 2015) led to a sudden rise in Fintech services. According to a recent IMF study by He et al., (2017), the market value of public fintech companies quadrupled after the financial crisis, surpassing many other sectors. Lack of confidence in traditional banks, increased credit service payments, increased debt burden of small scale industries, tight financial and banking regulations in the aftermath of the financial crisis could all have contributed to the massive launch of Fintech Services. In addition, the growth of the global capital market, well-established technological infrastructure also creates a demand for Fintech services. The growing trade volume, especially in the BRICS countries (Brazil, Russia, India, China, South Africa) is also one of the many reasons for FinTech startups in Asia and Africa. Today, India 1 Financial and Technology Services or Fintech Services "Fintech Services" and the Future of Financial Intervention - A Review 23 is the leading country in Asia that uses Fintech Services for its day-to-day business related financial transactions. However, some research suggests that part of this development may be the result of the high cost of financial interventions by financial institutions. Philippon (2014) estimates that the unit cost of financial intervention in the United States alone has remained at 2 percent for the past 130 years. Thus, Fintech provides services that promise to reduce intermediate costs and improve the quality of financial services that enhance customer welfare. Fuster et al., (2019) provide evidence that Fintech services improve the productivity of mortgage lending.

 

Sri Lanka Status Sri Lanka has a bank-based financial system consisting of two state-owned banks and 24 other licensed commercial banks. In addition, licensed specialized banks, insurance and leasing companies, the stock market, and licensed microfinance institutions play a vital role in providing financial services to the nation. The Central Bank of Sri Lanka ensures the stability of the financial system while enhancing effective financial intervention to promote investment

and economic growth. In terms of the level of financial intervention in Sri Lanka, it is still low compared to other regional counterparts. The financial intermediate level, as measured by the M2b money supply, is 49% of the gross domestic product (M2b / GDP). In addition, bank lending to the private sector (private sector lending / GDP) is another good step towards financial intervention, with about 45 percent in Sri Lanka. The last four decades have seen only a 10 percent improvement in this regard. There are still large numbers of people living in rural and urban slums who do not even have a bank account. "Samurdhi" Mandatory Savings - The above situation in the country has improved due to a comprehensive social security program in the country and the recently established Farmers Insurance Program and other related transfer programs. However, there are still groups left. Thus, the country's financial sector is not yet fully developed. Therefore, the use of Fintech services in Sri Lanka is also unsatisfactory compared to peers in other parts of the world and region. It is still in its infancy. When operating without cash, the situation in Sri Lanka is still deplorable. Considering the impact of credit and debit cards, a large number of cards have been issued and have been in circulation for many years but have failed to make much progress (de Silva, 2019). The volume of mobile wallet cashless transactions implemented by telecoms and banks has also not increased significantly. The fact is that about 95% of all retail transactions in Sri Lanka are still cash based (de Silva, 2019). Even in rural India, people use QR code based payments; Sri Lanka has not yet implemented these services in the country. In general, the banking system in Sri Lanka has been digitized and many of them have internet banking facilities. However, very few banks use mobile banking services and related applications. For example, People's Bank, a leading state-owned bank, has a mobile banking application called "People Wave" which has become very popular among the citizens of Sri Lanka. Almost everyone with a People's Bank account has this app on their smartphone or personal computer and uses it for their fund transfers and bill payments. In addition, Nations Trust Bank has recently launched Europe's most popular 'Nations Open API Banking' in Sri Lanka, with the aim of opening up and attracting new customers to the Bank. Keells Super, one of the first users of the new offer in the supermarket chain, will use its point of sale (POS) terminal to link a bundle of FriMi branded applications provided by NTB to their bank account and customers (Andreasyan, 2018). However, peer-to-peer payment platforms such as PayPal and WeChat are not operational in Sri Lanka. However, several Fintech-related forums are working with banks and other financial institutions to explore how Sri Lanka can use these services and facilitate cross-border financial transactions. Recently, LankaClear Limited. They announced the launch of an app called "JustPay" aimed at encouraging a low-income society. As they emphasize, the "JustPay" system only requires a smartphone in the customer's hand. No investment is required for infrastructure such as a POS terminal or a vendor's smartphone. Also, they emphasize that all a merchant needs to know is whether the customer's payment has been credited to his bank account. An SMS will be sent to his mobile phone showing the final result. The Central Bank of Sri Lanka is assisting in appointing a Fintech Committee as well as a Sandbox Committee to encourage Fintech adaptations. In particular, Fintech aims to facilitate these services and thereby minimize the risks associated with those services in a controlled environment introduced by the Central Bank. Therefore, the use of Fintech services will increase in Sri Lanka in the near future.

Organizations operating in the Sri Lankan banking sector have recently focused on the rapid transition to digitization and automation. The epidemic has also played a major role in accelerating the transition from traditional banking systems. Robotic Process Automation (RPA), Machine Learning (ML) is critical to becoming competitive in the Sri Lankan banking industry, enhancing the level of digital banking products, convenience payment wallets and customer experience.

 

Banks, on the other hand, need a skilled and efficient workforce to promote, encourage and educate customers to switch to digital banking products while providing unmatched customer service. In addition, the elderly client base, which often lives in rural areas, intends to physically come to the bank to complete financial transactions in which traditional customers seek to interact with the bank staff.In addition to the digitization of traditional banking systems, human capital plays a vital role in building a loyal customer base.

 

Banks, therefore, need to implement appropriate human capital policies and strategic workforce plans to recruit, train, promote and mobilize employees according to resource requirements. Timely training and skill development programs, methods of identifying and rewarding, are particularly important for retaining employees from being hunted down by competitors.

 

 

CONCLUSION

The purpose of this essay is to review the existing literature on Fintech services and their impact on traditional financial intermediate practices and the impact of human capital. This essay addresses this issue, focusing on changes in banks' loan, deposit and capital accumulation services and payment, clearance and settlement services due to two main factors.

Fintech Services i.e. P2P lending and digital wallets and cryptocurrencies. Analyzing the impact on credit, deposit and capital raising services using a detailed methodology, the discussion  bank lending and P2P lending platforms and revealed that banks in general do not pose a significant threat from Fintech, but it will. Migration of lenders to P2P platforms from banks where fewer people use the banking system and where regulatory costs and risks are high. If so, banks will lose some of their customers, but evidence shows that banks will acquire the technical skills needed to cope with the challenging environment in the near future. Fintech's impact on banks' payment, clearance and settlement services was made by analyzing the use of digital wallets and cryptocurrencies. Evidence has emerged that the growing use of smartphones in many parts of the world, which has a small banking population, has replaced digital wallets with digital wallets, which could pose a potential hurdle for banks in the future. However, the use of cryptocurrencies will not be more successful in financial markets compared to Fiat currencies. Evidence has shown that the monopoly nature of monetary creation by the central bank cannot be replaced by such innovative features due to its risky and unreliable nature. In this sense, opponents' argument that Fintech services will lead to a complete financial disconnect may fail, as all the facts and details related to Fintech's innovations provide evidence that the bank is in the process of acquiring skills to meet the new challenge. In Sri Lanka, despite having a well-established banking network, there are still a large number of low-income families who are not connected to the system. Thus, the usage of Fintech services is still very low. Therefore, the Government, in conjunction with the Central Bank of Sri Lanka, should take the necessary policy measures to promote the new trend among Sri Lankans and encourage financial institutions to adopt these innovative innovative services, thereby enhancing financial inclusion in the country. This technological advancement, such as Fintech products and services, will bring innumerable blessings, especially in the worst cases of epidemics and other associated social disasters around the world, when people are trapped in their own homes and unable to interact with the world personally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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