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Management Discussion and Analysis

Leading Through Innovation

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Conventional business models and ecosystems are being rapidly transformed, and the rate of technological change and the rush of new, agile, entrants to the financial landscape has intensified competition and risk over the past few years. Especially following the COVID-19 pandemic, banking has entered a new chapter in its evolution, with consumers being much more aware of digital banking features and many first-time users have grown accustomed to using them. In the post-pandemic “new normal”, the banking landscape is shifting to “digital by choice,” offering customers instant gratification, increased convenience, flexibility, and tailored services they seek. As a pioneer in the digital space, the Bank welcomes these challenges driving inclusion of all consumer segments into a digital economy.

Even as the pandemic has accelerated digital transformation and forced radical changes in customer behaviour, customers’ demand for digital products and the comfort and willingness to engage digitally has increased, with significant portions of the economy moved online. In such a milieu, the Bank delivered compelling, emotive digital propositions that elevate customer experience to meet the expectations of this new normal. Especially during the June-September 2020 period when the entire country was on lockdown and banking was made one of the essential services in the country, demand for continuity of service through digital channels escalated. The investments made by the Bank over the years in building its digital ecosystem provided a strong foundation to meet these challenges and become a pioneer in the digital payment space, spearheading many initiatives and technological innovations, both for retail customers and corporate customers.

Digital Road Map 2021 – 2023

Aligned to the Bank’s digital vision of building a digital economy where each customer is engaged at their level of techno-literacy, the Bank’s Digital Road Map is focused on retail customers encompassing products, services, processes and touch points. The digital transformation for the next three years is driven by three goals:

  • Ensure business growth
  • Create business value
  • Enhance digital customer experience

Accordingly, the Bank will continue to invest in redesigning its conventional banking processes as digital processes, integrating with other ecosystems and upgrading internal systems to be ready to adapt to anticipated changes in the regulatory environment and risk management. Reskilling staff and attracting specialised talent, building partnerships, and developing data capabilities continue to be areas of emphasis.

Table – 10: Investments in IT infrastructure

Indicator/Year 2021
Rs. Mn.
2020
Rs. Mn.
2019
Rs. Mn.
2018
Rs. Mn.
2017
Rs. Mn.
Investments in Hardware (Computer Equipment) 434.054 505.742 567.689 1,034.115 791.165
Investments in Software (Licenses etc.) 768.047 409.322 387.432 333.181 449.354

Total

1,202.101 915.064 955.121 1,367.296 1,240.519

Migration to digital channels

The Bank set up Mini Digital Experience Zones to help customers gradually migrate to digital channels. These zones are strategically placed to attract conventional customers giving them the opportunity to experience the Bank’s digital offerings. Dedicated Digital Assistants were deployed to guide customers through digital services and facilitate handheld migration for customers.

The Bank also set up automated banking centres in the branches to help customers adopt digital channels. These electronic spaces is another industry first by the Bank offering basics of digital services, including facilities for customers to submit loan inquiries and requests for fixed deposits. These revolutionary initiatives in the electronic banking space have accelerated customer digital adoption. Furthermore, as per the Bank’s Digital Road Map, the sales management app and retail customer on-boarding app will be launched to increase customer onboarding to the Bank’s digital banking channels.

Table – 11: Migration to digital channels

Indicator/year 2021 2020 2019
Number of existing customers migrated to online banking 212,806 157,599 109,873
New customer acquisition through
digital channels
12,491 16,327 14,957

ComBank Digital

ComBank Digital, the state-of-the-art integrated online banking platform provides access to a multitude of banking services across multiple devices. It consists of internationally recognized user security features with industry standards. The platform has a range of built-in options enabling customers to self-customize their digital banking preferences, without the assistance of a bank agent. Customers can execute and monitor transactional activities in a fast and secure manner and the platform supports bill payments to more than 80 entities.

During the year under review, several enhancements were effected to elevate the user experience and convenience. These included improving the payment capabilities to Government institutions through the LankaPay Online Payment Platform to institutions such as Board of Investment (BOI), Inland Revenue Department and EPF integration. The platform placed the Bank in the forefront of digital payments, becoming the first bank in Sri Lanka to integrate with the Import and Export Control Department (IECD) for online payments, enabling customers to pay their license fees to the IECD conveniently 24/7.

A dedicated YouTube Channel was launched to increase customer awareness about ComBank Digital in addition to user guides, FAQs hosted in the application, as well as the corporate web site. Early redemption of fixed deposit feature introduced in the platform attracted many users during the pandemic period where the travel restrictions were imposed. Furthermore, instant approval of home loans and leasing will be enabled adding further convenience to customers.

Following the implementation of ComBank Digital in the Maldives in 2021, the platform was enabled with customer self-onboarding and cross border remittances. The number of customers using ComBank Digital increased by 55%.

Figure – 18: Customer usage of ComBank Digital/online channels

35%

Growth of number of customers on boarded digitally (YoY)

2020 – 44%

105%

Growth in number of transactions (YoY)

2020 – 46%

109%

Growth in value of transactions (YoY)

2020 – 54%

Figure – 19: Total financial transactions initiated through digital channels

Number of transactions*

37,841,881

2020

23,724,058

Growth in number of transactions (YoY)*

60%

2020

10%

*Total transactions without SLIPS/CEFTS

Value of transactions (Rs Bn.)*

2,356.170

2020

1,386.250

Growth in value of transactions (YoY)*

70%

2020

22%

% of customer transactions below Rs. 200,000

92%

2020

97%

Flash Digital Bank Account

Flash Digital Bank Account, the Bank’s revolutionary trilingual app, offers unique personal financial management tools that encourage, empower, and embolden users to better engage with their finances, make wise choices about spending and saving and, enrich their financial wellness. A range of features were added to enhance and elevate user experiences during the financial year under review.

To create increased value to stakeholders, “Pay with Flash” service was launched, partnering with leading lifestyle partners. An advanced budgeting dashboard "My Portfolio" was launched to provide a single dashboard view of customer's investments and borrowings. Instant mobile reloads and top ups and payment of bills through credit cards was enabled through the app as well. Furthermore, "Need Money" feature was added to enable customers to share their interest on obtaining a personal, educational or housing loan or a leasing facility from the Bank. The app was also equipped with
a “Flash Finance SPACE” function to generate such requests.

Flash e-Statements was introduced with payment and receipts facility and detailed e-Receipts for Flash transactions with the option to share via email and WhatsApp. The introduction of “JustPay enables customers to add any bank account to top up Flash and make payments, and functions of “My Payeesand “My Billers” were added to the homepage menu with recent payee and biller templates. The Bank also launched a new website for Flash – www.flashbank.lk in 2021.

Flash also includes the revolutionary “Save the Environment feature that promotes an understanding of the social carbon footprint of consumption by assessing each transaction carried out via the app. Doconomy, the global impact-tech leader gave an international recognition to Flash Save the Environment initiative positioning the Bank among first few leading banks embarked on climate change. In recognition of the outstanding practices and innovative initiatives in Asia's retail banking sector, the Asian Banking and Finance magazine awarded the Flash Digital Bank Account, the “Digital Banking initiative of the Year” in Sri Lanka at the 2021 Asian Banking and Finance (ABF) Awards.

"Instant Loan Facility" for Flash customers against e-FDs will be introduced in the near future as well. In Bangladesh, the Flash platform was introduced to accelerate onboarding of customers by overcoming the limitation of a small branch network. “Flash DKYC” feature is ready to be introduced to accelerate digital onboarding of customers by establishing KYC via a video conference call.

Figure – 20: Flash usage

40%

Growth in user base (YoY)

2020 – 80%

186%

Growth in value of transactions

2020 – 468%

137%

Growth in volume of transactions

2020 – 323%

142%

Growth in usage of funds transfers

2020 – 354%

188%

Growth in usage of Bill payments

2020 – 260%

Q+ Payment App

Q+ Payment App launched in 2019 is the first QR based Payment App to be certified and launched under LANKAQR, which allows the entire Debit and Credit card base of the Bank to make QR payments and other payments conveniently. This is the only payment app in Sri Lanka that supports LankaQR, mVisa, Mastercard QR and UnionPay QR transactions and it is certified for use at overseas QR merchants through the Visa, MasterCard and UnionPay networks.

The Payment app is enabled to make payments in many categories such as data reloads, pre-paid and post-paid mobiles, fixed telephone lines, utilities, water and electricity (CEB and LECO), pay TV bills, credit card outstanding, pre-paid cards top-up, Insurance, Education and Mobile wallets. The Payment App will be further enhanced with the inclusion of more beneficiary companies to improve the customer experience in the future.

Another innovative payment experience was launched for the Bank’s Q+ Payment App customers called “Q+ Online Pay”, which enables Q+ customers to pay for online purchases by entering their mobile numbers at over 3,300+ merchant websites and apps that have “Q+ Payment App” as a payment option. This state-of-the-art payment method allows users to keep their sensitive card and account details away from merchant platforms as Q+ Payment App users are required only to enter a mobile number at the point of purchase.

Parallel to the launch of “Q+ Online Pay”, Commercial Bank has added the “Q+ Online Pay payment option to its credit card settlement webpage, enabling customers to seamlessly settle their credit card outstanding through Q+ Payment App by typing only their mobile numbers.

Online Payments – Internet Payment Gateways

The Bank has swiftly established itself as a market leader within the growing E-Commerce sphere, with its payment processing services. During the year under review, the Bank initiated multiple measures to enhance the inclusivity, interoperability, functionality and security of cashless payment platforms.

In partnership with DirectPay, one of the fastest-growing fintech start-ups in Sri Lanka, the Bank provided Internet Payment Gateway (IPG) support and became the acquiring bank for the cashless payment solutions of DirectPay. In collaboration with UnionPay International (UPI), the Bank issued a unified QR code under LANKAQR specifications that includes the UnionPay QR code, thereby widening the user base for electronic and digital payments, catering even to foreigners visiting Sri Lanka. Opening its door to the new era of E-Commerce that is faster and more convenient, the Bank became the first in Sri Lanka to deploy EMV 3DS fraud prevention technology for authenticating payments made by credit, debit, and pre-paid cards in collaboration with Visa.

As the preferred IPG partner to a cross section of businesses in Sri Lanka, the Bank provides payment processing services via Mastercard Payment Gateway Services (MPGS) and Visa Cyber source platforms that offer tokenization support which has increased customer convenience immensely. These solutions also provide access to a comprehensive set of fraud mitigation tools, supporting both “Mastercard Secure Code and “Verified by Visa 3D secure authentication solutions while having the fully-automated process to handle ComBank Easy Payment Plans (EPP). The Bank’s IPG solutions also support device-optimised payment screens which are designed to offer a seamless experience to users of various devices; a feature much requested by the local E-Commerce industry.

Figure – 21: IPG usage

65% YoY

Growth in IPG Volumes (2021)

37% YoY

Growth in IPG Merchants (2021)

Point of Sale (POS) Services

With the aim of increasing financial inclusivity and digital payment value growth, the Bank introduced low cost, contactless card-based options to customers and enabled merchants to collect their payments conveniently. The variety of Cards offered by the Bank are equipped with “Tap ’n Go NFC technology and backed by a strong NFC Point-of-Sale (POS) network.

The launch of the first LankaQR supported Android POS device was deployed allowing the processing of transactions via VISA, Mastercard, UnionPay, LankaPay, and JCB cards as well as QR-based wallet payments under LankaQR. This provides customers a frictionless and cashless payment experience and drastically reduces the waiting time at checkout counters. Positioned as the most advanced Android POS device in the country, the Android Smart Terminal combines the functionality and portability of an Android terminal with tailored security-certified payments software, facilitating acceptance of transactions via all Card Schemes.

Figure – 22: Growth in POS acquiring volumes

97% YoY

Growth in POS acquiring volumes (2021)

RemitPlus for Worker Remittances

The Bank’s remittance app, ComBank RemitPlus, was launched in December 2019 to commemorate International Migrant Day. Several enhancements were effected during the year to enhance user experience. “Combank e-Exchange” was relaunched as “ComBank RemitPlus” and the Bank introduced a remittance agent funds management module. Remit Plus payment process was simplified by converting cash to account at branch counters, and incentives were offered to increase worker remittances. The outward USD online payments to other local Banks and Malé operations were automated, whilst offering special rates to the latter. Separate authority levels were assigned for e-Exchange call centre agents to serve customers, 24X7. Remittance Tracker was integrated with Phase ll development of Remit Plus App and Blockchain for remittances-Ripple version 4 of phase ll was upgraded. The Bank enhanced the Blockchain based remittance channel with global remittance companies. Double Vaasi, Western Union and Moneygram, Double Cash & Double Chance promotions were conducted to encourage direct remittances to the Bank, with more winning chances to Bank Remittance customers.

WhatsApp Banking

Demonstrating its innovative use of new-age communications, the Bank pioneered the ground-breaking product on WhatsApp; the world’s most widely-used messaging platform, becoming the first Sri Lankan bank to offer Banking Services on this platform. Launched in 2020, the platform offers a versatile range of very quick and easy-to-operate banking options for both account holders and non-customers, and importantly, can facilitate opening of accounts for those seeking to become customers. With an estimated,over 6.5 million social media users in Sri Lanka, WhatsApp banking is the most logical path to enhancing access to services, especially as this service does not require the user to be particularly tech-savvy. Account holders can access several services including checking their account balance, viewing account history, or requesting a cheque book, while both customers and non-customers can ask for fixed deposit rates and foreign exchange rates, self-register with the ComBank Digital app, or open a new account through Flash. WhatsApp Banking will function as an interim digital offering through which the Bank can reach busy customers inclined towards digitising their banking experience whilst eliminating the need for customers to visit a branch for basic banking services. Since commencement of operations in January 2021, the number of customer registrations increased to almost 37,000 and total usage was 570,923 for the year ended December 31, 2021.

Viber Banking

Becoming the first bank to launch Viber Banking in Sri Lanka, the Bank enabled account holders and non-customers alike to seamlessly enjoy real-time banking services delivered through an interactive artificial intelligence (AI) chatbot on Viber. The Bank aims to encourage the Bank’s non-digital customers who are also Viber users to embrace digital banking through ComBank Digital, inspire potential customers with Viber to open “Flash Accounts, and to invite anyone to obtain hassle-free credit facilities from the Bank.

Sri Lanka being among the top five markets for Viber in the Asia Pacific region with over 15 million registered users, offering banking services on this platform is focused on serving its customers with solutions that are relevant to the times and achieving another milestone in the Bank’s Social Network Banking operations.

ePassbook

The first digital passbook in Sri Lanka and South Asia, ComBank ePassbook was introduced in 2016 as a pioneering product of the Bank, revolutionising the concept of the “Passbook.” Following the upgrade of self-registration, real time transaction notifications, and biometric login in 2020, new app downloads spiked to 768,000+ during the year 2021. With users in more than 100 countries, the log in rate is 20 per second, averaging more than 1,000 active users per minute, and over 1 million customer registrations. The app enables users to self-add, remove, or group Current Accounts, Savings Accounts, and Credit Cards. Future enhancements to the app will include viewing unlimited transaction history, including unrealized cheques, account holds and the total overdraft limit for current accounts. Furthermore, the app will be facilitated to view details of fixed deposit accounts and loans online, to keep track of details and operate the app in all three vernacular languages.

Process Improvements

The Bank introduced several new automated processes focused on building robust back-end digital process improvements to enhance customer experience and adapt to the new normal. Noteworthy developments include:

  • Becoming the first bank in Sri Lanka to accept digital signatures from business customers using LankaSign, to improve the customer experience of the Bank's retail and corporate customers.
  • Automation of the process of early Redemption of eFD.
  • The Bank’s core banking system will be upgraded to Signature 15.1 to ensure a robust and stable backend processing system and strengthen the security of the network.
  • Catering to the increased business demands, a new power system and a new virtual server was installed to the Data Centre to ensure high availability for the Bank’s core system.
  • A new switch stack and routers were installed to the network and communications system to achieve 99.98% uptime and minimize unplanned down time.
  • To increase efficiency of the cards operations an ATM reconciliation system was implemented, and the SMS alert registration process, credit card auto recoveries process, and the computing and evaluation process of credit cards were automated. A recoveries software “Smart Collect was installed to expedite the recoveries process. A workflow system was developed for scanned image processing of a credit card archival and processing of service requests for debit and credit cards.
  • Following the automation of CRIB reports through robotic process automation (RPA), analysis of CRIB reports was automated to support efficient decision making of the Bank.
  • An image-based customer request processing flow was implemented to minimize routing of documents and provide total visibility to customer requests.
  • A Memorandum Circulation and Approval System was introduced to route selected internal memos through a predefined workflow path and increase efficiency of the approval process.
  • A Customer Relationship Management solution - “The Service Portal” was launched to maintain a central repository of customer complaints received and the actions initiated.
  • CRM integration was implemented to enhance customer experience through a 360o view of the customer.

IT Operations and Security

The Bank’s highest priority is placed on maintaining uninterrupted systems and services for all stakeholders, managing the ever increasing threat landscape to cyber-crimes and loss of information, and ensuring preparedness for the future. The uptime and Service Level Agreements (SLAs) of the entire Branch network for Sri Lanka, Bangladesh, Myanmar, and the Maldives is monitored and maintained by the IT Support unit and this includes over 10,000 IT Equipment, 1,000 touch points and managing BCP Centers. The Network & Communication unit provides secure and reliable communication channels for all stakeholders, both internal and external, across the entire Branch network.

The IT Security Unit conducts regular security assessments to identify and assess system and application vulnerabilities and take appropriate remedial action with relevant stakeholders. The Security Information and Event Management (SIEM) solution is implemented and configured to identify security threats and the monitoring of security is done through dashboards and alerts. The Bank successfully maintained the PCI DSS and ISO 27001:2103 certifications during 2021 as well. The ISO 27001:2013 is a key international standard on information security management, which specifies requirements for establishing, implementing, maintaining, and continuously assessing and improving an information security management system against which the Bank had been continually certified for over 10 years. PCI-DSS is the global data security standard adopted by payment card brands for all entities that process, store, or transmit cardholder data and sensitive authentication data. It is one of the most stringent technical standards and its maintenance requires significant expertise and resources. This certification also covers the Bangladesh operations of the Bank.

The Bank has installed layered security controls which include Firewalls and other security devices to counter malware attacks in addition to maintaining the controls such as updating OS and application patches, maintaining backups, restrictions on remote access. To secure IT services, security controls such as threat protection for emails and a multi factor authentication in accessing critical systems has been introduced. The Bank provides tokenization support to its merchants enabling them to facilitate frictionless E-Commerce transactions to their customers. The Bank stores the card details within the Bank’s systems and provision tokens in merchant’s websites ensuring maximum protection to cardholders. The Bank also have enabled EMV 3DS functionality for its cardholders as well as E-Commerce merchants ensuring the highest protection available as per EMVCo standards. Mobile device management has been implemented with device control and hard disk encryption to improve the overall security posture of remote teleworking devices.