In the Caribbean, the Dominican Republic is seeing the emergence of a burgeoning fintech industry, a thriving ecosystem that has risen on the back of supportive regulatory initiatives and ambitions to improve financial inclusion.

With 55 active fintech companies, the Dominican Republic was identified by a new report from the Inter-American Development Bank (IDB) to be one of the most dynamic fintech markets in the Caribbean.

This ecosystem has blossomed these past couple of years from the mere two fintech companies it hosted back in 2017, figures which imply an impressive average year-on-year growth rate of 129%, the report says.

A 2022 map by the Dominican Association of Fintech Companies (Adofintech) shows a wide and diverse fintech ecosystem that comprises both local and foreign participants operating across varied subsectors including digital payments, alternative financing, neobanking, cryptocurrency and insurtech.

Image: Dominican Republic fintech map 2022, Source: Adofintech

According to recent data released by the trade group, 48% of fintech companies operating in the country are small companies, followed by micro companies with around 32%. Large companies have a share of 16% and medium-sized companies 8%.

There are currently around 12 foreign fintech companies with operations in the local market. 50% of these are from Latin America, 33% from Europe and 17% from the US.

Findings from a survey conducted as part of the IDB report found that the vast majority of fintech companies operating locally (65%) are offering products aimed at segments historically excluded from the traditional financial sector, a figure that’s among the highest across Latin America (LatAm) and the Caribbean. Nearly half of the Dominican Republic’s population do not have access to a bank account, according to data from IDB.

Image: Percentage of Fintech Startups Focused on Financial Inclusion and Percentage of the Population with Access to a Bank Account, by Country, Source: Fintech in Latin America and the Caribbean: A Consolidated Ecosystem for Recovery, Inter-American Development Bank (IDB), 2022

Government support

In the Dominican Republic, fintech development has accelerated in the wake of the COVID-19 pandemic and with the support of recent policy initiatives, the IDB report says.

The Financial Innovation Hub, for example, was launched earlier this year by the central bank and the Superintendencies of Banks, Securities Market, Pensions and Insurance to facilitate the development of financial and technological innovations, and harmonize them with objectives relating to financial inclusion, market efficiency, consumer protection and financial stability.

The Financial Innovation Hub is also responsible for providing personalized assistance and information on the regulatory and supervisory framework of the banking, payment, insurance, pension and securities market systems.

Most recently, the Dominican Republic took its first step towards open banking when the Superintendency of Banks (SB) and the International Finance Corporation (IFC) of the World Bank Group inked a partnership to collaborate on the design and implementation of the concept in the country.

Under the agreement, the World Bank and the IFC, with the collaboration of the Japanese government, will support the SB in its aspirations to create a regulatory framework for the use of application programming interfaces (APIs). The ambition is to increase the efficiency of financial institutions and improve user experience by leveraging data, while promoting greater financial inclusion.

In the Caribbean, governmental bodies and regulators are setting the foundations for fintech innovation by establishing innovation hubs and regulatory sandboxes, the IDB report notes.

In 2019, the Securities Commission of the Bahamas created SCB FitLink, a hub intended to serve as a central point of contact with the public on issues related to fintech including virtual assets, crowdfunding, distributed ledger technology (DLT) and artificial intelligence (AI).

In Barbados and Trinidad and Tobago, special regimes have been introduced to allow entities to experiment with innovative solutions and live test their products and services.

This article first appeared on fintechnews.am

Featured image credit: edited from Unsplash