Popular Hopes Processing Deal Leads to Still More

By Breitkopf, David | American Banker, May 2, 2005 | Go to article overview

Popular Hopes Processing Deal Leads to Still More


Breitkopf, David, American Banker


Popular Inc. hopes the $125 million investment it has agreed to make in the parent of a Salvadoran bank will help it expand its payments and processing businesses in the Caribbean and Central America.

The deal, announced last week, would give the Puerto Rican company a 19.99% stake in Corporacion UBC Internacional SA. Popular is to process all payment transactions of UBC's bank subsidiary, Grupo Cuscatlan, for five years.

Popular, the holding company of Banco Popular of San Juan, has run a payment processing business for 20 years. Last year it consolidated all its technology and processing units under one division, Evertec Inc.

Over the years Popular has expanded throughout the Caribbean and Central America, particularly in the Dominican Republic, where eight years ago it helped found Consorcio de Trajetas Dominicanas, a major payment network.

Grupo Cuscatlan has more than $4.4 billion of assets and 188 offices, in El Salvador, Guatemala, Costa Rica, Honduras, Panama, British Virgin Islands, Montserrat, and the Bahamas. In the United States it runs a family remittances transfer service and has a securities broker-dealer license.

Felix M. Villamil, the president of Evertec, said it would begin processing transactions for Grupo Cuscatlan sometime before yearend. He said that he could not yet estimate how much Grupo Cuscatlan would contribute to Evertec's volume, which in 2004 was 749 million transactions.

In an interview Thursday, Richard L. Carrion, the chairman and chief executive of Popular, said he thought the relationship could bring benefits to each of Evertec's electronic payment capabilities. Those include ATM driving, merchant processing, and acting as a switch between medical providers and insurance companies, as well as processing electronic benefits transfer transactions.

"These are all areas where we have established expertise that we think is exportable," Mr. Carrion said.

There are obstacles to overcome in the region, not the least of which is many consumers' preference to pay with cash. But Mr. Carrion said that Evertec would use its experience in Puerto Rico as a model for encouraging debit card use instead of cash. "Whether we can do it in other places remains to be seen," he said.

Checks have never been a major payment tool in the region, and he sees that as an advantage. "In essence, you can jump the check stage, straight into the card environment, which is similar to what happened in Europe," where debit use is widespread, Mr. …

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Popular Hopes Processing Deal Leads to Still More
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