Digital Banks - Sri Lanka

Sri Lanka

In Sri Lanka, the Digital Banks market market is anticipated to witness a significant rise in Net Interest Income, reaching US$183.60m by the year 2024.
Moreover, this sector is expected to exhibit a steady annual growth rate (CAGR 2024-2028) of 16.22%, ultimately leading to a substantial market volume of US$335.00m by the year 2028.
When comparing the global landscape, it is worth noting that in China is projected to generate the highest Net Interest Income, estimated at US$969,200.0m in 2024.
Sri Lanka's digital banking market is experiencing rapid growth, with local banks adopting innovative technologies to enhance customer experience and drive financial inclusion.

Key regions: United Kingdom, Japan, China, United States, Brazil

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

The Digital Banks market in Sri Lanka is experiencing significant growth and development, driven by various factors shaping the financial landscape in the country.

Customer preferences: Customers in Sri Lanka are increasingly embracing digital banking solutions due to the convenience and accessibility they offer. With the rise of smartphone penetration and internet usage in the country, consumers are seeking more efficient ways to manage their finances. Digital banks provide a user-friendly platform for transactions, account management, and financial planning, catering to the evolving needs of tech-savvy customers.

Trends in the market: One prominent trend in the Digital Banks market in Sri Lanka is the expansion of services to cater to the unbanked and underbanked population. By leveraging technology, digital banks can reach remote areas where traditional banking services are limited, promoting financial inclusion and literacy. Additionally, partnerships between digital banks and local businesses are on the rise, offering exclusive discounts and promotions to attract and retain customers in a competitive market.

Local special circumstances: Sri Lanka's regulatory environment plays a crucial role in shaping the Digital Banks market. The Central Bank of Sri Lanka has been proactive in promoting digital financial services while ensuring compliance with security and data protection standards. This regulatory support has encouraged innovation and investment in the sector, fostering a conducive environment for digital banks to thrive and expand their operations in the country.

Underlying macroeconomic factors: The macroeconomic landscape in Sri Lanka, including factors such as GDP growth, inflation rates, and foreign direct investment, influences the growth trajectory of the Digital Banks market. As the economy continues to recover from external shocks and political uncertainties, there is a growing demand for stable and reliable financial services. Digital banks, with their cost-effective operations and customer-centric approach, are well-positioned to capitalize on these opportunities and drive financial inclusion across diverse segments of the population.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.