Page 14 - QUALITY MAGAZINE_Volume 02 (Issue II)_Web Ready File (1)

QUALIT Y JANUARY 2024

Banking Liquidity Positions 4. Changing Customer Behavior:
The way people bank is changing as digital banking and
In reviewing fintech, banking liquidity positions can fintech solutions become more popular, which could
be analyzed through several lenses, considering both lead to changes in how customers use cash and make
positive and potentially challenging aspects:
deposits. As more transactions are done digitally, banks
1. Operational Risks & Legal Framework: may see shifts in deposit levels and transaction patterns
Fintech has the potential to improve productivity, but it that can affect their ability to predict how much money
also brings new types of operational risks. In the digital they will have available. For example, using mobile
age, cybersecurity threats, technological malfunctions, payments more often could reduce the need for physical
and data breaches are major concerns. To protect cash, which would affect how much cash banks need to
their liquidity from potential disruptions, banks need keep on hand.
to allocate resources to strong cybersecurity measures
and backup plans. It requires a legislative framework 5. Opportunities for Collaboration:
that guarantees ethical behavior in the interim, as well Despite the challenges, fintech presents opportunities
as protective measures and regulatory elements that for banks to collaborate and innovate. Partnering with
reduce operational risks. In this regard, the Central Bank fintech firms can enable banks to offer new products and
of Sri Lanka is essential in enforcing laws and rules about services, attract a broader customer base, and enhance
consumer protection, data protection and privacy, anti- operational efficiencies without compromising liquidity
money laundering and countermeasures, regulatory management.
sandboxes, cross-border transactions and compliances,
intellectual property, and the legitimacy of smart 6. Regulatory Considerations:
contracts. Regulatory frameworks governing fintech and banking
operations play a crucial role in determining liquidity
2. Efficiency in Fund Management: management strategies. Fintech innovations may
Fintech advancements frequently enable banks to necessitate updates to existing regulations to ensure
manage funds more swiftly and efficiently. Through financial stability and consumer protection. Regulatory
digital channels, banks can enhance their liquidity by changes can influence liquidity requirements, reserve
effectively overseeing cash flows. For instance, real- ratios, and capital adequacy ratios, directly impacting
time payment systems and digital wallets can expedite banks’ liquidity positions.
fund transfers between accounts, thereby decreasing
dormant cash reserves and enhancing liquidity “ Fintech PRESENTS
management overall. Opportunities for

3. Increased Competition and Margins:
Fintech firms, especially those providing alternative banks to collaborate
lending platforms and payment options, have the
potential to increase competition in the financial and innovate.
industry. This increased competition may prompt banks Partnering with fintech
to provide more attractive interest rates on deposits
and loans to attract and retain customers. While this is firms can enable banks to
advantageous for consumers, it may also squeeze banks’
profits, affecting their overall financial stability if not offer NEW PRODUCTS
handled cautiously. and SERVICES.”

Department of Industrial Quality Management
Department of Industrial Quality Management
12 Department of Industrial Quality Management Department of Industrial Quality Management 13
General Sir John Kotelawala Defence University General Sir John Kotelawala Defence University