Sri Lanka combines a unique set of enablers to pioneer the digital transformation of the economy and society - 150% SIM penetration, 92% mobile 4G population coverage, 7th lowest data cost of 230 countries worldwide with below 0.7 USD per GB, a 96% literacy rate, and a highly strategic geo-location right on the one belt one road initiative (the maritime Silk Road) connecting Asian and African regions encompassing 68 countries with over 65% of the world's population.
I had the honor of giving an interview about my views on the transformative power of digital technology and its potential for Sri Lanka, in the eminent Abacus Magazine. In the interview, I outline the significant opportunity for the country, and defy the notion of emerging vs. developed markets. I jointly call on all leaders to close the emerging “digital divide” in society. In my opinion every successful company in the future will be data driven, and therefore a large-scale upliftment is required covering public and private sectors, from education, legislation and regulation, to investments, agile ways of working, and innovation adoption.
How would you assess the pace of adoption when it comes to new technologies in Sri Lanka compared to the rest of the world?
In our digital age, there are no islands anymore. The world is globally connected. Cloud and softwarization have removed entry hurdles and democratized access to digital technologies, fueling the virtuous cycle of test – improve – scale. While local start-ups and some enterprises already embrace digital opportunities, I see the risk of a “digital divide” – separating digital adopters who are moving at an ever-accelerating pace, and the rest being left behind. To close this digital divide is one great challenge of our time.
As a country we have an excellent digital infrastructure foundation – high speed broadband access, first 4G and 5G demonstrations in the region, national cloud data centers, strong international bandwidth to connect with any global service. This infrastructure is provided at some of the lowest prices in the world. For example, our mobile data cost per GB is 7th lowest out of 230 countries globally. We must ensure not to lose out on further technology waves, such as commercial 5G and fixed-mobile integrated networks.
However, adoption of this excellent infrastructure is too low. Sri Lanka has less than 60% smartphone penetration, half the data usage per user of India, and most enterprises still use on-premise computing infrastructure. This low digital adoption cripples the wider use of higher-level technologies, such as software as a service, artificial intelligence, IoT and industrial automation.
Timely and widespread adoption of digital technologies across society and industry sectors are a prerequisite to achieve much increased productivity and exports, regional innovation leadership and wealth. This in turn will draw local and international talent, fueling the virtuous cycle of test – improve – scale.
Based on your experience in the adoption of new technologies and their practical applications in developed markets, what strategies can corporates use to overcome challenges in emerging markets?
Having had the chance to live and work in very different countries and cultures, I disagree with the implicit qualification of developed vs. developing markets. Scarcity invokes creativity and leapfrogging to new solutions. Mobile first instead of landline, cloud first instead of expensive servers, digital transactions instead of cash, renewable instead of fossil energy, circular instead of linear manufacturing, IoT automation instead of manual processes.
We are living in times of digital abundance, where connectivity, compute and information are exponentially decreasing in cost. Adoption becomes a matter of investing intellectual capacity rather than Capex. Every enterprise can start small, then learn and scale fast. Practically, a good start can be to setup one agile project team, to launch one innovation project, to digitize one business process, or to move one application workload to the cloud. Then take the learning and scale across the company.
Telecom operators have a natural advantage with technological innovation and dissemination in the market and are experiencing a transformation with this edge. Could you elaborate on this transformation with your experiences in different markets?
Among all industries, mobile service providers have the closest proximity to customers, literally around the clock. We all rely on calling, messaging and using the internet at all times, we reload our balance every other day, we add data, value-added services or pay our e-bill in real-time – resulting in millions of transactions every day. The most successful service providers constantly learn from all this information to continuously improve customer service, lower error rates and cost to serve, thus winning more happy customers, learning more, and improving further.
This virtuous cycle of learning, improving and winning more customers applies to all industries – but it requires a radical focus on the customer and use of customer insights, for which digital technologies open most powerful opportunities.
With faster connectivity such as 5G – which supports developments such as AI, big data, IoT, cloud connectivity and so on – which industries do you see being disrupted in the coming years?
There is not a single industry which is immune to disruption. There is not a single company which can lean back and just continue business as usual. A disruptive innovation, as first defined and analysed by Clayton Christensen, creates a new market and eventually disrupts an existing market, often with a new business model, displacing market leading firms. Drivers are typically outsiders who leverage disruptive technologies catering to new customer segments, while existing market leaders are stuck at best with incremental innovations catering to their existing customers - the “innovator’s dilemma”.
Photography, music, movies and publishing have already been redefined. Retail, transportation, education, hospitality, medical and manufacturing now undergo massive transformations. In the Sri Lankan and regional context especially interesting are banking and insurance, where connectivity, big data analytics and digital technology can unlock completely new markets. Low income and thus currently massively under-served customers can for the first time obtain a micro loan, pay day loan, medical insurance, or can build a wealth portfolio even with small funds.
Prerequisite to serve such new customer segments is a dramatically lower cost per transaction, which is perfectly enabled by digital technology and automation. The public regulator assumes a critical role to facilitate this digital transformation.
What is your take on the Central Bank of Sri Lanka’s proposed fintech regulatory sandbox? And what should be the objective of such an initiative?
For the sector to evolve quickly and to stay competitive on a global level, we need a solid regulatory framework which is aligned with the opportunities of digital financial services. We can fast track and learn from the most advanced markets, such as Europe and Singapore.
Most recently, the Payment Services Directive 2 (PSD2) came into effect in Europe after years of preparation; the UK flavour is called Open Banking Initiative. Both aim at strengthening competition and facilitating innovation, by opening and standardizing payment and customer’s account services and data through APIs. New (regulated) entrants can thus – with customer’s permission – provide additional financial services such as aggregating across all customer’s accounts and providing AI driven wealth management recommendations.
Financial inclusion and Fintech innovation in Sri Lanka will benefit from such openness dramatically, which will be much beyond a “sand-box”. Ideamart.lk is a successful example of a Sri Lankan open API platform, which has attracted more than ten thousand developers already, benefits millions of users, and is even being exported into the wider region. As said earlier, we have an outstanding digital infrastructure in Sri Lanka, it is about unleashing it.
While financial inclusion has been cited as a potential benefit of fintech, the sector has experienced limited growth with mobile money and payment services being among the few innovations to gain traction locally. What are the barriers to growth?
Sri Lanka indeed has an outstanding track record in mobile money and payment services, supported by the enabling regulation provisioned by the Central Bank of Sri Lanka (CBSL). As good example, eZ Cash was launched as early as 2012, became the world’s first inter-operable mobile money service, in 2015 received the Global Award for Best Mobile Money Service at the Mobile World Congress, and is now being used by millions of subscribers and transforming tens of thousands of retailers to digital online-offline merchants.
However, Fintech is much beyond payments, and we need to open all financial services to every Sri Lankan – savings to earn interest even for small funds, micro lending for a new smartphone, pay day loans to bridge a few days, wealth management to secure a happy retirement. And in order to do so, dramatically lower cost to serve is required, so customers don’t pay for overhead but a genuine service. Therefore, regulation should consider a “proportionality” principle. Expensive requirements, such as the need for a physical branch network, or the physical presence and signature of a new customer, must be adapted to facilitate much smaller financial amounts, and be replaced by much lower cost digital technologies, such as biometric onboarding, digital signatures, and open API standards which facilitate to leverage common backend infrastructure with multiple application front-ends.
Not only customers will enjoy lower transaction cost and a much wider choice of services. Also, public authorities will benefit greatly from replacing cash with electronic transactions. 100% traceability and transparency, further augmented by artificial intelligence, will provide opportunity for real time alarming about suspicious transactions, and to avoid tax evasion.
One essential enabler for a digital Sri Lanka will be a biometric ID system, which would unlock, secure and simplify not only inclusive financial services but a wide array of private and public services from issuing SIM cards and opening bank accounts to welfare and pensions. To this end, the strength of the Dept. of Registrar of Persons could be augmented into the digital domain. Other nations can serve as a reference, such as India with Aadhaar through the Unique Identification Authority of India (UIDAI).
You have stated that the computational power of today’s applications will be virtually dwarfed in 10 years. What are the implications of this and how can businesses ensure they stay up-to-date with technological advancements?
Computing power has exponentially increased for the last 120 years, enabling innovations which would have been deemed impossible just few years before. In addition, new technology platforms constantly emerge, such as mainframes, PCs, mobile phones, 3D printing, mixed reality, deep neural networks, generative networks, which by itself further enable new applications.
It is safe to say that in this world change is the only constant. What are the implications for enterprises therefore? There is no silver bullet, but the successful company in the future will likely be
Fully data and analytics driven – build a common data lake, analytics infrastructure, and data savvy team across the organization
Agile and thus more resilient – break down hierarchies and silos, run cross functionally staffed projects working together like cells in an organism
Constantly learning – ignite the virtuous cycle test – improve – scale, and keep adopting new platforms, tools, algorithms while retiring legacy early
To address digital threats, a national cybersecurity strategy has been developed, a cybercrime unit has been established and a cybersecurity bill is expected to be enacted. From a national perspective, what other measures are needed to address these risks?
In our digital age, we are globally connected, and cyber threats don’t stop at borders. Data and information become a key asset for individuals and enterprises, which must be protected. Both data privacy and cyber security are of utmost importance, national standards - such as currently Sri Lanka’s Personal Data Protection and Cybersecurity bills in preparation - need to be established, implemented and enforced.
The European General Data Protection Regulation (GDPR), effective since May 2018, is a global precedence with its aims to give control to individuals over their personal data. Key is to raise awareness with each citizen about the rights with respect to personal data, as well as the risks when using the internet. Schools and parents need to educate children, who are exposed to the internet at an ever-younger age, about the associated risks and how to behave in cyber world, similar to teaching about the real world.
Which functions are most likely to be eliminated by automation – and how can professionals prepare for these changes?
Most manual, repetitive, and standard mathematical tasks will be taken by computers and robots – faster and more precise. Soon there will be no human drivers, bots help us in the hotline, supermarkets don’t have cashiers, financial reconciliations & forecasts are provided by AI, just to mention a few examples.
However, experience in the past decades, and recent studies, show that new jobs are created at least at same pace as jobs become obsolete. For each individual this means lifelong learning and adaptation. For companies this implies a great responsibility in constant training and skills augmentation.