Author: Christopher Paniagua, CEO, Banco Popular Dominicano
July 1, 2022
The Dominican Republic is witnessing the emergence of a banking industry that is increasingly dynamic. Instead of the traditional blanket market focus, the industry now has specialised players whose strategies are geared towards capturing specific segments of the market and pursuing dominance. Going by the configuration of the country’s economy, the emergence of specialisation in the banking industry has meant one thing – intense competition on the doorstep of leading banks.
Despite the emerging dynamics, Banco Popular Dominicano is unfazed. The bank has remained steadfast on its institutional values that have guided its growth over the years. Thus, by implementing strategies anchored on anticipation, innovation and supporting the country’s sustainable development, the bank continues to grow its market share and command leadership. This is evident after the bank increased its market share to 24.9 percent last year. Total assets surged to $10.9bn with earnings increasing by 40 percent. The impressive performance saw rating agency Fitch reaffirm the bank’s rating at AA+ in March this year.
A market leader
In the span of about six decades, the bank has risen to become the main private financial institution in the Dominican Republic. Today, the bank is a market leader in nearly all businesses and customer segments. The bank has managed to achieve this feat by adhering to its mission of democratising financial services in the country. It has also stayed true to its vision of promoting initiatives and involving the Dominican society in socio-economic development, with a keen emphasis on sustainability. Digital transformation has been at the core of its growth. In fact, leadership in the digital sphere has been instrumental in facilitating the financial inclusion of thousands of Dominicans.
Having managed to sustain strong market leadership amid the emerging dynamics and COVID-19 disruptions, Banco Popular Dominicano is poised for the next phase of growth. In the immediate and mid-term future, the bank intends to continue with its innovation-driven strategic approach.
This entails implementing new technologies for the modernisation of financial services, offering solutions that expand its portfolio of products and increasing the efficiency of the processes that generate more value for its over two million customers.
Luckily for the bank, the economic fundamentals are ideal. The Dominican Republic was badly ravaged by the COVID-19 pandemic with gross domestic product (GDP) contracting by 6.7 percent in 2020, according to the World Bank.
Recovery, however, has been swift and strong. In 2021, GDP rebounded by 12.3 percent. This was supported by a solid policy response to the pandemic including fiscal, macroprudential and supervisory policies and monetary easing.
Key sectors like tourism, remittances, foreign direct investment, mining revenues, free-trade zones and telecommunications have made the Dominican Republic the second fastest growing economy in Latin America and the Caribbean region over the last decade, with the economy expanding by an average of 5.3 percent from 2000 to 2019. Prior to the pandemic disruptions the country was on track to realise its ambition of achieving high-income status by 2030.
Banco Popular Dominicano has been a major facilitator of economic development in the Dominican Republic. The bank’s huge exposure in tourism, for instance, has been instrumental in the sector’s splendid growth and performance. Government data show that tourism represents 8.4 percent of the country’s GDP. If ancillary services are factored in, the sector’s true impact is estimated in the region of 30 percent.
The bank’s innovation-centric culture has set the pace for digital transformation in the Dominican Republic
Banco Popular Dominicano’s support for the tourism sector dates back 25 years when it became the first banking entity to understand the paramount importance of developing the industry for the stability and growth of the country. The bank created a business unit specialised in promoting and invigorating the sector. Riding on its historical leadership in financing the sector, the bank has been one of the leading promoters of its recovery from the COVID-19 devastation.
Today, the bank contributes almost half of the volume of loans that banks in the country grant to the tourism sector. In 2021, its credit portfolio to the sector stood at $1bn, a 10 percent increase compared to 2020. The bank’s financing to the sector represents around 15 percent of its loan portfolio annually. Over the last seven years, the bank has granted financing of more than $1.4bn, of which $716m, approximately 50 percent, has been given for the construction and renovation of some 13,600 hotel rooms. The bank’s financial support for tourist activity is distributed among nearly 800 clients, including leading foreign hotel groups.
For Banco Popular Dominicano, becoming a leader not only in the tourism sector but also in financing other sectors of the economy has not come by default. Rather, it is by offering customers expertise in personal, commercial and corporate banking services through innovative products and high value-added solutions. This has been made possible by the bank’s belief in constant innovation, strong corporate governance and ethical principles and values.
In particular, the bank’s innovation-centric culture has set the pace for digital transformation in the Dominican Republic. In fact, putting digital transformation at the core of operations has brought about high levels of efficiency and robustness not only for client services but also as a driver for growth. Last year, Banco Popular Dominicano was named as the banking entity with the highest level of digitisation in the national financial system consisting of 17 banks. The bank obtained a score of 9.83 out of 10 in the Ranking of Digitisation of Dominican Banks carried out by the Superintendence of Banks.
The ranking was an affirmation of the bank’s deeply entrenched digital strategy. This is because in general, 85.5 percent of the bank’s operations were already being carried out electronically through the bank’s different digital channels with 13 percent done manually and 1.5 percent through the Subagente Popular network. In the last five years, the bank’s manual transactions have been reduced by half, giving way to electronic transactions.
In October last year, Banco Popular Dominicano demonstrated its leadership in the digital space after App Popular, its financial application for mobile phones, exceeded one million affiliated clients. This represented a growth of 52 percent compared to the same period in 2020. In essence, it means 26 percent of the bank’s transactions will now be carried out on the platform. This is quantified in a total of 565,000 operations every day and 23,545 per hour. Apart from the app, which can allow anyone to ‘become a customer,’ the bank boasts of a retinue of other digital offerings that enable customers to carry out various transactions with the convenience and comfort of their digital devices.
As part of its technology and innovation strategy, the bank signed a strategic agreement with Microsoft designed to expand its consulting services and technological products for small and medium enterprises (SMEs), including offering them cloud storage solutions and capacity building. The bank understands the importance of SMEs not only in driving economic growth but mainly in job creation. In 2020, micro enterprises accounted for nearly 80 percent of all enterprises in the Dominican Republic. Although medium enterprises accounted for only 2.6 percent of the total, they employed 10.2 percent of the workforce. Over the past seven years, Banco Popular Dominicano has been using the Impulsa Forums to empower SMEs, managing to reach over 14,200 entrepreneurs.
For customers without smartphones and access to the internet, the bank has an alliance to offer tPago, a service based on USSD technology. Although 80 percent of Dominicans own a mobile phone, half of the population do not have smartphones. The tPago service is able to link bank accounts and credit cards to customers’ cell phones to enable them to make payments, transfers, purchases, top-ups, queries and disbursements without consuming minutes or data. The service is among the bank’s proactive strategies to drive financial inclusion in the country. Another strategy is through the Academia Finanzas con Propósito, an innovative web platform with educational content on personal, family and business finances. The bank created the platform to extend financial education with the aim of educating more than 150,000 Dominicans by 2030.
Notably, the strategy is part of Banco Popular Dominicano’s commitment to the United Nations Principles for Responsible Banking. As a financial entity that believes in the tenets of sustainability, the bank is a founding signatory to the UN Principles. Being a signatory enables the bank to respond to the demands of society and the challenges of climate change. With the Dominican Republic among the countries that are most vulnerable to climate change, the ultimate goal is to align financing to sectors that help in adaptation and mitigation. The key focus is renewable energy across photovoltaic, wind and biomass parks. The bank is currently a financier and collateral agent at seven extensive facilities and sustainable energy companies with a portfolio amounting to $2.8m.
A sustainable future
The bank has also created a portfolio of products and services with preferential conditions dubbed Hazte Eco in order to promote greater use of sustainable mobility and clean energy in homes and businesses. Hazte Eco, the largest and most convenient green finance portfolio, had a value of $21.5m as of March 2022, distributed in loans, green leasing and personal and business lines of credit that are offered at lower interest rates compared to those in the market. The financing enables customers to acquire hybrid and electric vehicles, charging stations, vehicles without motors, solar panels and efficient appliances, among others. Through the facility, the bank has granted more than $14.6m in financing for electric and hybrid vehicles alone. Banco Popular Dominicano’s strong credentials on sustainability also saw it act as the underwriter for the $100m Larimar Trust, an investment vehicle that is completely new to the Dominican securities market and that promotes sustainable development in the country.