Sri Lanka must go digital eventually: IDC Financial Insights MD

IDC Financial Insights Managing Director Cyrus Daruwala was in the country recently for the inaugural international CIO conference ‘The CIO Agenda 2015’, themed ‘The Digital Flip’. 

At the conference Daruwala, who has for the past 20 years been working with financial institutions to help them assess their business and operational and technical challenges, gave a keynote address on digital transformation and customer experience.

The Daily FT caught up with him for a brief interview to delve deeper into some of the issues facing Sri Lanka with regard to those aspects. Following are excerpts:

By Madushka Balasuriya

Q: What is the feedback or blowback you have received so far with regards to suggestions of going digital?

A: Is Sri Lanka moving or are they ready to move? Absolutely; however, the justification isn’t there. Technology is a big investment, it’s a big undertaking with a lot of capital and people etc. but what if there’s no take up? What if the average Sri Lankan is not ready for mobile commerce or mobile payment? What if the average Sri Lankan is not comfortable with Amazon and Alibaba purchases? It’s easy for the banks to supplement that but there’s no take up. That’s where Sri Lanka is stuck; it’s a bit of a limbo where they’re not able to get the right sense of take up. Maybe 2-3 million Sri Lankans are really in to the digital world. That’s too small a market. So yes, you’re 100% mobile penetrated but you’re not doing anything transformative on the mobile. We’re making calls, sending texts, using Whatsapp, Tango and Viber but that’s about it. Are we really purchasing? We’re not. So essentially the banks can do it but they are a little sceptical that there’s no take up, there’s no ROI. It will take a little while for the market to mature and then the banks will follow, that’s what I think.

Q: So does that mean this will happen eventually, even with these apprehensions?

A: Yes, you can’t avoid it for much longer because right now I want to see my balance on my phone. And it’s not a web browser, I want a mobile app. So people are developing that. You and I have utility bills and tax bills and road taxes to pay, can I do it through the mobile? Why shouldn’t I (be able to)? Yes you can. Why can’t I book a train or bus through on an NFC? Yes you can. So the minute the consumer demand gets to a certain, what they call, market standard or threshold then the banks will quickly follow.

Q: The Sri Lankan market is obviously smaller than its South Asian neighbours, what can we learn from what you’ve seen in those countries as far as adopting new technology?

A: India was very reactive. You see China overtook India 5-10 years ago and remember China only just started. Any country that starts off, they don’t have that big dirty word ‘legacy’. China didn’t have legacy, it had four state-controlled banks and they’re amongst the biggest, well capitalised and most profitable banks in the world – not in Asia – in the world. ICBC for example, had no legacy whatsoever. It had a massive mainframe, it realised that the market had moved and come to a certain maturity level. So they bought brand new technology and were ready from day one. 

Now the market will move again, and they will have to refresh once more. Sri Lanka is at that juncture. (Sri Lanka should) not try to emulate China or India, that wouldn’t do you any good because what’s applicable there is not applicable to Sri Lankans. What the institutions should do is get a sense from what their demographics are asking them to do. A couple of things that we can learn? Trying to second guess the market won’t work. China tried to second guess the market. Sri Lanka can leapfrog and say, “I will pull in the market, I will ask them ‘what is your requirement now? What will give you nirvana? What will be ‘wow’ for you’ and then create that product.” That’s what I would say you should do.

Q: How important is public sector backing in terms of innovation?

A: Public sector banks tend to be more complacent. Why? Because you got the ‘big daddy’ and they will bail you out if something goes awry. For example, if your non-performing loans are high China bails out the ‘big 4’ state owned banks; they do anything from $ 200-400 billion in bail out if the non-performing loans go high. Sri Lanka does not have that kind of capital or money to bail out, so the governance on public sector banks is as tight as on a private sector bank. This means they’re well governed though they’re government owned and they’re well controlled and well capitalised. 

Now that also makes them a little complacent from a technology point of view, which is why we’re seeing the number one and number two state-owned banks coming to us and saying, “I’m now seriously looking at digital and mobile. How can I change?” I would say try not to overdo the tech part but just be relevant to your existing customers. So wow them, entice them, excite them.

Q: Delivering customer wants and needs is not a novel concept, what’s holding people back?

A: Well Apple didn’t do that did they? Apple said, “The customer doesn’t know anything. I will do a better job,” but then you have to have that conviction to have a product that is so ‘wow’. Uber was not tested. AirBnB which is bed and breakfast, that was not tested, it was a concept. Two, maybe three percent if you’re lucky have the ‘cojones’ to try out something new, because they’ve been given that level of autonomy. Unfortunately the other 97-98% doesn’t have that autonomy. 

A CEO has only one objective: make sure the shareholders get the dividend and the profit. So he’s so obsessed by that there is no margin for error, there’s no margin to try. That’s the unfortunate reality. Which is why a couple of these people if they’re smart enough, pushy enough, creative enough they can ask themselves, “If we’re not getting additional funding for a big project, what can we do with the existing data set and customer database?” It will see a small spike in expense but the ramification, the wow factor, the advocacy will be so great that people will go spread it on social media. That would be my message.

       – Pic by Upul Abayasekara