Impressive economic growth and increasing diversification plus an array of government-funded infrastructure developments is fuelling economic opportunity for investors in the Dominican Republic. A secret sauce, or a succession of sound policy-making supported by special economic zones and serious long-range planning?
Productivity is up. The implementation of many market-orientated reforms from the 1990s have matured and come good. For major banking players like Banreservas, higher foreign direct investment means more commercial and retail opportunities, strengthening its hand across digital banking and fintech.
This year’s re-election of President Luis Abinader with almost 60 percent of the vote reinforces the country’s economic stability narrative. Now, in a new interview for World Finance, Banreservas executive president Samuel Pereyra says that while the compliance and tech pressure is immense, the chance to meaningfully improve lives and develop new products is profitably paying off.
Between 2020 and 2023, Banreservas profits and total assets were sharply up, thanks to tourism, SME business and construction. How sustainable is this growth for the next three years?
I am optimistic about sustainable growth in our country’s key sectors, such as tourism, SMEs and construction. Tourism has diversified post-pandemic, attracting a broader audience with a lot of innovation going on. However, investing in infrastructure and training is crucial to maintain competitiveness. For SMEs, digitalisation and government initiatives to help financing will support our growth. We feel the construction sector is recovering due to housing and infrastructure demand, but adopting sustainable practices is crucial.
Overall, these sectors have great potential for growth in the next three years as policies that promote investment and sustainable development continue. Banreservas supports all these sectors for the greater well-being and prosperity of all Dominicans.
How long can a dual office set-up that blends digital and customer-facing operations remain before going 100 percent digital? Or will a part-physical commitment stay in place indefinitely?
In our experience a hybrid approach, blending digital operations with face-to-face interactions, is the right mix. In other words, dual offices provide flexibility, catering to customers preferring personalised service, especially for more complex financial matters.
The trend, yes, is towards more digitalisation. A dual set-up is sustainable if it is aligned with customer expectations. So I would say the future is definitely hybrid, focusing on digital while maintaining personalised service. The key really is agility in adapting to market demands.
How much of your growth hinges on ex-pat business and services, or Dominicans living abroad? How will this market grow sustainably over 2024 to 2030?
Dominicans abroad play a big role in driving our economy, both in local consumption and business growth. We think this market will grow sustainably between 2024 and 2030 due to digitalisation, facilitating quicker and more secure transactions, plus more interest generally in investing in the Dominican Republic. For us it is crucial to improve financial services for the diaspora, including strengthening representative offices, tailoring products, and offering personalised service. This will consolidate our relationships with Dominicans abroad, ensuring robust growth, we anticipate.
How much is the remittances market worth and how profitable is it?
The Dominican Republic’s remittance market was up 3.1 percent and hit $10.3bn in 2023, a record year. Remittances are crucial for families and to stimulate overall economic growth. For us, the sector’s profitability stems from money transfer services and complementary products – it is very competitive and that is a driver for more innovation across a lot of different services, putting the customer front and centre. The remittance market also impacts local socio-economic development by promoting consumption and investment in SMEs. Innovation and inclusion in this segment are crucial for future growth, a focus for Banreservas in the years ahead.
How many digital customers do you have – and how much will this grow by in the next 12 months, do you think?
Banreservas boasts 1.7 million active users across digital channels, processing 13 million transactions a month through our App Banreservas and TuBanco (web version). More digital advancements, like the new digital token, digital accounts and digital fixed term deposits, provide clients with convenient self-service options also. In the next 12 months, we anticipate a 40 percent increase in users, driven by tech improvements and new services. A continued focus on financial inclusion – this is very important for us – will contribute to the expanding digital user base.
In 2023 around 85 percent of transactions were digital. Where will this be by the end of 2025, do you think?
By 2025 digital transactions will likely become the norm, with significant growth in mobile payment platforms and digital wallets. We anticipate the proportion of digital transactions to increase beyond 85 percent, with services like loans and financial advice conducted digitally.
Emerging technologies like AI and blockchain will also enhance security and efficiency. Banks have to adapt by offering innovative solutions and prioritise a customer-centric experience, driving the shift towards a more digital economy.
In terms of digital services, does the bank subsidise the internet data consumption use of customers? If so, by how much?
We understand access to digital services is essential for our customers, especially in an environment where digitisation has become increasingly important. For this reason, since 2021, we have put in place ‘Data Patrocinada,’ where Banreservas covers the total cost of data consumption associated with the Banreservas App.
Users of the Banreservas App, for example, who have data services from telecommunications providers in the Dominican Republic, can make balance inquiries, pay bills and settle credit cards, as well as make other transactions, in an immediate and safe manner.
What digital niche markets are you looking at getting into in future?
We are probing several digital niche markets to drive growth and promote financial inclusion. Key areas include leveraging technology for cost-efficient, customer-orientated solutions, collaborating more with fintechs than in the past, and implementing digital financial education and inclusion platforms. There is a lot going on in this space.
Our ‘Bancarizar es Patria’ programme exemplifies our serious commitment to financial inclusion, we feel, offering few requirements and providing educational resources. By focusing on collaboration and innovation, we aim to adapt to our clients’ needs while fostering genuine social equity and the country’s broader development.
What about your digital security programme – where are the biggest risks coming from, and how will your clients be protected from them?
Security is a huge priority for us, from prevention and detection to cyber. We absolutely prioritise securing our technological infrastructure and are actively educating our customers about best security practices. We have built our own Cybersecurity Operations Centre (SOC) equipped with state-of-the-art technology and certified staff for 24/7 monitoring and response. Also, our blog, ‘Your Security,’ provides customers with timely information for asset protection. We have combined advanced technology, ongoing education plus a very agile threat response. We feel we have created a very secure environment for our clients – we continue to work very hard here.
What proportion of your digital business is from low-income customers or the financially excluded? And will this ratio rise in the next 12 months – if so, by how much?
More than 50 percent of our digital customers are from low-income or financially excluded segments. We expect this to grow in the next 12 months as we expand our offer, targeting underserved communities to drive financial inclusion – for as many of our people as possible. Our average month-over-month growth in digital savings account openings exceeds 20 percent.
I would say the future is definitely hybrid, focusing on digital while maintaining personalised service
Also, our social responsibility programme – we take this very seriously indeed – aligns with the National Development Strategy, promoting socio-economic development through initiatives in education, financial inclusion, entrepreneurship, and co-operative development. The ‘Reservas del Futuro’ scholarship programme supports outstanding students, while the Banreservas Cultural Centre fosters culture and education.
How does it integrate with your social responsibility programme more widely?
Banreservas’ social responsibility programme integrates closely with our overall strategy by supporting vulnerable communities through initiatives in education, financial inclusion, entrepreneurship and cultural development. Our ‘Reservas del Futuro’ scholarship programme benefits outstanding students, while the Banreservas Cultural Centre consistently fosters arts and culture.
We also have Voluntariado Banreservas, our social arm, working to cut the needs of the less fortunate sectors of the country, building a world of possibilities and hope that generates a positive impact on the future of our nation.
We always aim to support national talent, promote cultural growth, and provide opportunities for artists to connect with diverse audiences. By this we contribute meaningfully to the social and cultural development of the Dominican Republic, aligning ourselves with the National Development Strategy.
How does your digital coin programme work – how challenging has it been to develop?
Currently, this type of currency is not regulated by the Central Bank of the Dominican Republic, nor does it have the authorisation of the Monetary Board for its issuance and use as a means of payment for any transactions. This presents significant challenges that limit our ability to offer cryptocurrency-related products in a safe and effective manner.
While we are observing trends in the cryptocurrency market and its evolution, our primary focus remains on strengthening our traditional services with new tech, ensuring the security of our services while maintaining the trust and satisfaction of our customers.
How do you differentiate digital accounts with traditional deposit accounts, characterised by fixed terms and interest rates? Do digital products offer a better deal?
To encourage digital adoption with our digital savings account, we have implemented a new strategy that offers a differentiated value proposition compared to traditional savings accounts. We now have a defined fee structure with highly valued benefits for both existing and new customers, who can connect with the bank 100 percent digitally without a minimum opening deposit requirement. Also, digital accounts are exempt from minimum balance charges, making them very attractive to customers.
What is your risk management approach to currency risk – are you increasingly blending your USD exposure with CNY, for example?
Our risk management approach focuses on neutral or long positions in USD and EUR to meet market demands. We have a robust structure for identifying, measuring, monitoring, and communicating risks, integrating three lines of defence. We deploy Value-at-Risk (VaR) and Expected Shortfall (ES) to measure exposure to exchange rate risks, and our Risk Appetite Statement defines tolerance and capacity levels. Monitoring indicators, exposure limits, and alert levels are tracked and reported to decision-making bodies. This is a comprehensive as well as responsible risk management stance, we feel.
In your judgement, what condition is the Dominican Republic economy in at the moment – and how is it positioned for 2025?
The Dominican Republic’s economy is growing, with positive signs in sectors like tourism, construction and SMEs. GDP growth is robust, and foreign investments, exports and remittances are vital supporting pillars here. It really is encouraging. But inflation and public debt management are challenges that do need prudent fiscal and monetary policies to maintain stability and confidence.
Looking ahead to 2025, optimism is very much warranted, I feel, as projections now very much show a strengthening of major sectors and economic diversification. Aligning with global trends like sustainability and financial inclusion will enhance our country’s competitiveness. By addressing challenges, the Dominican Republic can more reliably seize incoming opportunities. We have a lot to be proud of and excited about.
What structures are in place to balance the bank’s role as a government-owned entity with its commercial banking operations?
We balance the state-owned entity status with commercial operations via a strong corporate governance structure. We have an autonomous board of directors with public and private sector experience ensuring decisions are always based on efficiency and profitability. Also, we have specialised committees which oversee key areas, balancing our public and commercial objectives.
We supply full transparency, disclosing financial reports and undergoing rigorous audits. There are strict policies around potential conflicts of interest, maintaining our independence and robustness in management while safeguarding market competitiveness. We feel we have got the mix right.
How does Banreservas manage potential conflicts of interest given its ties to government?
Banreservas manages potential conflicts of interest through a series of policies and practices designed to ensure transparency and integrity in our operations. Firstly, there is a governance framework that includes a robust code of ethics, which establishes clear guidelines for all our employees and executives regarding decision-making. Additionally, we maintain a clear separation between our banking functions and government decisions, allowing us to operate independently.
We contribute meaningfully to the social and cultural development of the Dominican Republic
We also conduct regular internal audits and external reviews to ensure compliance with established regulations and standards. This not only reinforces our transparency but builds trust among our customers and partners. Finally, we promote a culture of reporting situations that may represent a conflict of interest, ensuring the right measures are taken to address them promptly and effectively. Through these efforts, we aim to operate with the utmost responsibility and ethics in our actions.
What banking innovations can you reveal for 2025 and beyond?
In 2024, Banreservas made substantial strides in innovation. Our 2025 goal is to solidify our market leadership in the Dominican Republic and our international offices. Our digital transformation journey will persist, ensuring we remain reliable, efficient, agile and digitally driven without compromising our human touch. So we will be a more international, efficient, customer-centric service institution preparing ourselves for a dynamic, accessible future that’s genuinely inclusive for every Dominican wherever they are. We think that is very exciting.