Fintech start-ups moving to other countries
More and more fintech start-up firms are relocating to other countries, to overcome funding issues and other red tape in doing business in the country, industry officials say.
The Fintech sandbox, which is a framework set up by the Central Bank (CB) to allow small-scale, live testing of financial innovations by private firms in a controlled environment under the regulator’s supervision has not done much to the industry as well, they add.
In the CB sandbox, there is a clause saying that start-ups should collaborate with traditional banks, which has not been an attractive option for the local entrepreneurs.” These entrepreneurs feel that such a collaboration will not benefit either party. Either they abandoned the idea or leave the country,” an industry official told the Business Times on Wednesday. He said that over 10 companies have left in the last 10 months. Raj Kumar, Kanagasingham, President Sri Lanka Fintech Association, also confirmed this. “We have seen that most start-ups prefer to leave the country. They feel that there is no point in registering with the Sri Lankan sandbox as the regulatory environment issues are big.” Noting that it is difficult to attract investments from Sri Lanka, he said that In the recent past, many fintech entrepreneurs have shifted to countries like Singapore, Hong Kong, and countries in West Asia. “Most importantly, these countries are financial hubs. Registering businesses in these countries is more attractive for investments. Firms that have registered in these companies have partnered with local firms to start their business.”
However, he said that they have not entirely forgotten about Sri Lanka. While certain companies run as Singapore-registered firms, for example, they use Sri Lanka as a back end to develop products.
“The good thing is that they always use Sri Lanka as a back end in their operations. Once the economic stability resumes, they’ll always try to return to the country,” Mr. Kanagasingham said.
The firms which had applied for CB Fintech Sandbox were however not successful due to issues in their application, a CB official said. He said that these applications were received more than three years ago and since then no one had applied.
He said that the CB had a briefing session at the Hatch for Fintech firms some time ago and mentioned that at the beginning, it will take some time to build up the ecosystem with the banks. He added that they cannot exclude the banks as the banks are at the forefront of the fintech business in terms of getting the products across to customers.
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