Why Sri Lanka Is the Next Frontier for Fintech Innovation

As fintech entrepreneurs seek untapped markets with high potential, Sri Lanka is surging as a compelling destination. With a recovering economy, rapidly growing digital infrastructure, and increasing support from the government, this South Asian nation offers fertile ground for founders, investors, and digital disruptors alike. 

1.Rebounding Economy & Digital Momentum 

Sri Lanka’s economy is bouncing back with GDP growth rates reaching 5.3% in Q1, 4.7% in Q2, and 5.5% in Q3 2024 (KPMG, 2025 Budget Analysis). This economic rebound is accompanied by progress in the digital economy: 

• Mobile Penetration: 148% (32.49 million connections) in 2024 

• Internet Usage: 53.6% of the population, which is 12.4 million individuals using the internet in 2025 (Digital 2025 Sri Lanka) 

• Digital Payments Market: Expected to grow from US$5.53B in 2025 to US$8.56B by 2029 with an annual growth rate of CAGR 11.52% (Statista) 

Infrastructure for fintech applications: These figures highlight that Sri Lanka has mobile infrastructure well-suited for fintech applications such as mobile banking, e-wallets, and digital payment platforms. Meanwhile, moderate internet penetration points to significant untapped potential, especially in underserved areas. The steady growth in digital payments further indicates that while the digital economy is maturing, there remains ample room for expansion and innovation in the fintech sector. 

2. The Gap and the Opportunity for Fintech Founders 

2-1 Financial Inclusion: The Gap Behind the Numbers 

Despite a banking penetration rate of 74%, digital payment adoption remains limited, especially in retail and distribution sectors (AB Magazine). This creates an opportunity for fintech startups to reach underserved segments by offering accessible mobile payment apps, digital wallets, and peer-to-peer platforms. For many individuals, obtaining similar services from traditional commercial banks remains difficult, giving fintech solutions a unique advantage in driving digital financial inclusion. 

Startups’ Opportunity: There’s a potential market need for fintech startups to develop accessible, user-friendly platforms that can extend digital financial services to underserved populations. Bridging this gap could unlock a new wave of inclusive growth for Sri Lanka’s economy. 

2-2 Reaching the Rural and Underbanked 

A significant portion of Sri Lanka’s population lives in rural areas where financial services are often limited or entirely absent. This presents an opportunity for fintech innovation focused on the unbanked and underbanked. 

Several initiatives to narrow the gap are in motion: 

Startups’ Challenge: However, despite these efforts, startup founders still face challenges in reaching rural communities due to limited digital literacy, trust issues, and fragmented market needs. While the infrastructure exists, the execution gap, particularly in outreach, education, and product design, remains a critical hurdle for startups. 

2-3 Recommended Solution: Partnering With Telecoms 

One pathway for the fintech founders to reach the untapped population and enhance financial inclusion is to collaborate with telecom to expand their reach

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• Collaborate with leading telecoms (Dialog Axiata, SLTMobitel, Airtel, Hutch) or telecom startups to enhance internet and smartphone access. 

• Make the fintech service easy to access 

  
  

The example of fintech companies collaborating with telecoms include Pomelo × Dialog Axiata and BaseKit × Sri Lanka Telecom. 

3. Government Support & Regulatory  

Sri Lanka is actively laying the groundwork for a cashless, inclusive economy through national strategies like: 

• National Financial Inclusion Strategy for Sri Lanka (2021-2024):Prime objective of improving the financial inclusiveness of the country by facilitating more accessible, effective, efficient and affordable financial services. (NFIS)

  

• Digital Sri Lanka 2030: Targets a 50% increase in digital transactions and the rollout of GovPay, a unified platform for government services. (MoT) 

  

• FinTech Regulatory Sandbox: Launched by the Central Bank to let startups test innovations safely before full compliance. (CBSL)

• Digital ID Project (SL-UDI): Improving service efficiency and data accuracy across public services. (Biometric Update) 

Investors’ Entry Point: The total budget of Sri Lanka in 2025 is Revenue 4960 Billion rupees and Expenditure 7190 Billion rupees. Though the 2025 digital budget is only US$10 million, we may assume this signals a call for private capital to fill the funding gap. 

4.Ecosystem 

The fintech ecosystem includes 24 licensed commercial banks, 6 Licensed Specialised Banks, and 33 licensed finance companies (Central Bank of Sri Lanka).  

The ecosystem is vibrant with 157 fintech companies and a growing set of key ecosystem players like: 

Founders’ Opportunity -  Addressing the Integration Gap:  Though Sri Lanka's fintech landscape features a variety of ecosystem players, it still lacks a comprehensive, all-in-one digital payment solution that can seamlessly integrate transactions across government services and business. 

5. Investor Appeal 

Foreign investors are increasingly turning their attention to Sri Lanka as its economy stabilizes and digital transformation accelerates. In 2023, the country attracted US$711 million in foreign direct investment (FDI), reflecting renewed investor confidence despite past economic challenges (World Bank). Moreover, frameworks like the Singapore–Sri Lanka Free Trade Agreement (SLSFTA) and double taxation avoidance

agreements with over 40 countries, including Singapore, offer legal protections, tax relief, and greater clarity for cross-border investors, further reinforcing Sri Lanka’s appeal as a strategic fintech expansion hub (IRAS). 

6. Risks to Consider 

While Sri Lanka presents exciting opportunities for fintech expansion, it is important to acknowledge several limitations and risks. The country still experiences medium internet penetration, particularly in rural areas, which restricts the reach of digital financial services. This limited connectivity highlights both the potential for growth and the infrastructure gaps that still exist. 

Fintech startups in Sri Lanka also face constrained access to venture capital and angel investment abroad. Compared to more mature ecosystems like Singapore, the number of investors is relatively low, which may hinder early-stage growth for new entrants. 

Macroeconomic instability remains a concern. Sri Lanka has undergone frequent currency devaluation, high inflation, and sovereign debt defaults in recent years. Events such as the economic crisis in 2022 have impacted investor confidence and introduced volatility into the market (TheStreet). 

Lastly, the regulatory environment in Sri Lanka is still evolving. The lack of established and consistent fintech regulations creates uncertainty for foreign investors and requires careful navigation. 

Why Now Is the Time

Sri Lanka offers a great opportunity for fintech founders and enterprise, which are low competition, untapped need, and room for innovation. From SME tools to mobile wallets, founders willing to work through structural barriers will find not just growth but impact. 

For founders looking for product-market fit or an investors seeking frontier opportunities, Sri Lanka may just be the next strategic bet.