Digital transformation for greater financial inclusion

Banco Popular Dominicano has led financial innovation since its founding 52 years ago in the Dominican Republic. With digital innovation, it plans to maintain that tradition

An office of Banco Popular Dominicano in Santo Domingo, Dominican Republic 

Recently, the Dominican Republic has seen many vital changes to its banking sector. Through important technological applications, it has expanded its coverage across the country, as well as increasing the number of services available to customers.

State reforms such as the Monetary and Financial Law have improved the quality and regulation of the sector, making banks within the island nation more secure and stable. This was seen in the low default rate at the end of 2015, which stood at less than two percent. Banco Popular Dominicano has excelled in both regards.

Founded in 1963 and opening its doors to the public in 1964, the bank is a leader in Dominican finance, with in excess of 200 branches and over 7,000 highly trained employees. In terms of technology, Banco Popular Dominicano has taken the lead in the nation’s financial service sector, being the only bank to employ the mobile banking technology of the electronic wallet – a vital product in expanding people’s access to banking in a country with low levels of bank penetration.

World Finance spoke to Manuel A Grullón, President of Banco Popular Dominicano, to discuss how the Dominican banking sector has and continues to change across the board, as well as the role the bank has played within this area. Banco Popular Dominicano has also outlined its commitment to various social and environmental causes, such as promoting a culture of saving throughout the country, as well as fostering entrepreneurship.

How has the banking sector in the Dominican Republic evolved recently?
A major change has been the implementation and reform of the Monetary and Financial Law. This has provided an improvement of main market indicators for banking supervision. In that sense, one of the greatest achievements in the sector is the high level of solvency in banks, with the solvency ratio standing at 14.4 percent in December 2015.

Likewise, the quality of loan portfolios at the end of 2015 showed a default rate of 1.7 percent. In the case of Banco Popular, we are pleased to have the lowest delinquency rate of the national financial system, at 0.97 percent.

In addition, the system’s transparency has increased, with monthly and annual financial statements, as well as details of deposits, loans and investment institutions which are posted on the Superintendence of Banks website. Likewise, the financial system has managed to develop more competitively, with the merger of financial institutions, the entry of new entities into the market and increased digital services being offered.

The creation of subagents and mobile banking facilities has expanded the number of people who have access to certain financial products. In our case, we have the widest network of banking sub-agents in the country with 1,451 affiliated businesses.

Our virtual electronic wallets – prepaid bank accounts associated with mobile phones – are unique in the country. The Dominican banking industry has expanded its coverage and increased the number of services available, while quality within the sector has improved alongside the institutions that manage and regulate them.

What are the biggest challenges and opportunities for the banking sector?
Among the challenges facing the banking sector at local and international levels is the use of technology to promote higher levels of financial inclusion, and to meet the demands of new generations. In addition, at a local level, tax and regulatory costs imposed on financial institutions remain a challenge, both of which impact upon bank competitiveness.

However, the good macroeconomic performance that the country has experienced in recent years has increased opportunities for the sector. The low level of banking penetration in the country may also translate into opportunity. The introduction of new technologies alongside expanding financial figures should result in service improvements in operational efficiency, and in turn greater financial inclusion.

How important is digital banking for the sector’s growth?
Last year, digital banking was important for Banco Popular Dominicano. We carried out various initiatives to engender a technological transformation to our bank; to create a digital banking customer-focused service. This is in keeping with our role as pioneers in financial innovation in the country.

For over 52 years, we have been democratising financial services, with high impact innovations that have played a central role in facilitating the inclusion of new bank users in the country. This has been a distinguishing feature of Banco Popular Dominicano.

In that sense, we have made available to our customers new digital solutions supported by technology platforms and channels that facilitate interaction with our bank at any time and from any device, anywhere. As a result, at the end of 2015, 68 percent of our customers’ transactions were made through digital and electronic channels, demonstrating a high level of digitalisation, which was clearly above average in the national banking system.

We know the preference and importance of digital channels for our customers, so we work hard to stay ahead. In addition, a third of our customers belong to the Millennial generation, and represent 11 percent of turnover at our institution. Being savvy in digital technology, they account for a higher level of banking through these channels compared to the average customer.

What advantages does digital banking afford customers over traditional banking?
Banco Popular Dominicano is constantly improving its digital services. During 2015 we renewed the website in line with the most advanced international standards. Now customers can search, compare, choose and apply online for many of our products and financial services, receiving an immediate response from the institution. The site is one of the most visited Dominican pages, with 3.6 million monthly inflows and 13.1 million transactions per year.

As for mobile solutions and their impact on customers, it has become more frequent for our customers to make transactions through Mobile Banking Popular. The increased use of the mobile platform tPago has also been key. This technology solution links the bank accounts and credit cards of customers with the number of their mobile phone. From here they can instantly make payments, transfers, purchases, recharge and balance inquiries. Every day we recorded 4,200 transactions through mobile devices. Last year we saw an increase in use of 62 percent, which speaks of confidence and the high acceptance of these channels for a large segment of the population.

Additionally, in order to achieve higher levels of financial inclusion and banking penetration, we continue to develop our electronic products. The wallet is the ideal product for reaching customers who are underbanked, given its ease of acquisition and use. We are the first and only bank in the country to provide this service, associated with the two major telecommunications companies. All of the above translates into greater efficiency, time saving and better life quality for our clients, helping them to manage their finances.

Can you tell us a little about the bank’s commitment to social inclusion?
Banco Popular Dominicano seeks to increase levels of entrepreneurship, education and financial inclusion among the entire population, but with a particular emphasis on young people, who will have the leading role in the future of the nation. Our goal is to promote training, a savings culture and entrepreneurship among the youth. Therefore, we provide specific channels and a portfolio of products and services with preferential conditions.

For decades we have also been developing a model of socially responsible investment that hopes to seek greater sustainability and social integration. We aim to achieve this through programmes that value people and their dignity, as well as having respect for the environment and nature. We have a number of specific programmes that meet these reasons, such as: Saving is Good; Entrepreneur People; and Finance Purposeful, among others. The commitment outlined here is also reflected in more than 50 initiatives undertaken on average each year from the various programmes of corporate social responsibility of Grupo Popular.

With a percentage of our profits we also serve a wide range of stakeholder programmes dedicated to the environment, education, health, social management, art and Dominican culture. It is within these activities that financial institutions – with their large resources – can add significant value and sustainability. Alongside this, we are a prominent part of the network of companies committed to the United Nations and its Millennium Development Goals. Our efforts in social investment are aligned to meeting these vitally important objectives.