Dominican Republic’s traditional bank Popular made waves in the Caribbean when it announced the launch of Qik, the first neobank on the island.
With over $10 billion in assets, the financial group -one of the largest in the country- envisaged a need to serve younger customers with a particular digital-only institution. This trend is increasingly frequent among many of Latin America’s largest banking institutions as the rise of digital consumers grows. Similar cases include Banorte’s Bineo in Mexico or Bradesco’s Next in Brazil.
Qik received a banking license in October, paving the way for the digital bank to expand its range of financial services. Grupo Popular’s financials back the endeavor. It will invest nearly 4 billion Dominican Pesos in Qik in the next five years, or over $70 million.
“We have a profitable business, and Grupo Popular, our parent company, provides us with strong support,” Arturo Grullón, CEO at Qik, told Fintech Nexus.
The Dominican Republic was set for a digital bank
The digital bank launched a Mastercard credit card first. To boost adoption, it offers unlimited 1% cashback on all purchases. Then it rolled out a virtual account with a 4% annual rate return on deposits.
“The Dominican Republic was all set for its first digital bank,” Grullón said. A high mobile phone penetration, he said, carves an untapped opportunity to promote banking digitization in the country.
Official data states that 83% of Dominicans have a smartphone and 80% have internet access, which contrasts with the fact that only 46% of Dominicans are properly banked, according to Central Bank data. “As we turn every smartphone into a banking branch, we are in an ideal position to bridge this gap.”
Expansion in sight
Most Caribbean fintech firms have been so far domestically focused, although some believe there is an opportunity to expand to other islands. While initially offering its services to Dominicans only, Qik is looking ahead to regional opportunities.
“To a greater or lesser extent, this (financial gap) context is replicated in most countries in the Caribbean,” says Grullón. “The experience gained locally will be vital to developing an intelligent expansion strategy.”
The Caribbean region is home to over two dozen countries with a population of nearly 45 million. While the Dominican Republic is the region’s largest economy, with a population of over 10 million and a $100 billion GDP, eventually, digital-born enterprises might expand beyond borders.
The Caribbean fintech ecosystem
The Dominican Republic boasts the largest ecosystem in the region. According to a study by the Inter-American Development Bank, the island seeks to consolidate itself as a leading fintech hub in the area, with 55 reported fintech companies as of 2021. Average growth per year has been around 130%, and it is one of the fastest-growing ecosystems in Latin America. Just five years ago, the island country reported only two fintech companies.
Its growth is the latest illustration of how the sector is moving by leaps and bounds in almost every country in the region.
“It is no secret that the Caribbean region has experienced significant development in digital entrepreneurship, especially within the fintech framework,” said Qik’s Grullón. The pandemic, he said, has been a critical driver as well in accelerating digital banking adoption.
Expanding the portfolio
The target audience of Qik is primarily digital-savvy customers. “At Qik, we appeal to a broad range of customers, but they all have in common being modern banking clients who have adopted digitalization,” said Grullón.
The digital bank will continue to expand its product suite, including a debit card in the works. Soon, Grullón said, loans will also be made available for Qik’s customers. “Credit is the product our clients seek the most,” he said. “The idea is to complete the portfolio with insurance and investment products later.”