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JMMB going after a bigger share of remittance market

JMMB Group, which operates in three Caribbean countries, has a medium-term plan to grow its remittance business sixfold.

The service, executed through JMMB Money Transfer Limited, contributed $160 million profit in the financial year ended in March.

“Our goal for the remittance and money transfer business line is to hit $1 billion in profitability in five years’ time,” said Group CEO Keith Duncan.

The target wasn’t set by just “pulling a number from a hat”, he added.

It’s based on the performance of the segment that’s doubled in profit and market share over the past five years, he said.

Jamaica has a US$3.4-billion remittance market that’s largely served by companies such as JMMB Money, but also the banks, which have a tiny share. In local currency terms the annual flows top $530 billion.

Remittance providers earn from fees charged to facilitate the transfers. JMMB Money collected $590 million last year for its services, nearly a quarter of which flowed to its bottom line.

To hit the $1-billion profit target, Duncan said it entails building out new products to bring in new revenue. For example, JMMB announced its partnership with MoneyGram in September, and also recently launched its Visa prepaid card for money transfers. The next step, Duncan added, includes launching a cheaper and trackable wire transfer service.

“Everybody knows the pain point in doing a wire transfer. Small businesses do not know whether the wire was sent or has arrived. They do not know,” he said, while addressing the company’s annual general meeting. “So, in partnership, we have built out a new cross-border product, where within a short period of time you can track your international transfer,” he added.

Customers will receive tracking information within a day. The pricing of the product, however, is still being determined.

The bad economy has influenced JMMB Group to widen its focus from investments to offerings that can deliver fixed or wide margins, such as remittances, real estate and private equity, the company said.

“The investment business line would have been significantly impacted over the last three years, and we are still impacted because the interest rates are still at elevated levels,” Duncan said.

The investment side of the business is constrained by high interest rates in Jamaica, which in two years has gone from 0.5 per cent to 7.0 per cent for benchmark rates set by the central bank.

Rate hikes makes it easier to profit from banking with fixed transaction fees, but carries a cost on the investment side when clients demand higher yields that serve to thin out margins.

“Going forward, you will be seeing a faster pace of growth on our banking side, which gives more stability and stable earnings,” said JMMB Group CFO Patrick Ellis.

JMMB Group earned net operating revenue of $6.59 billion for the first quarter, reflecting a marginal increase of 1.0 per cent. The group earns half its revenue in Jamaica, about one-third in Trinidad & Tobago, and nearly 20 per cent in the Dominican Republic. The revenue was constrained by tighter margins, due most notably to the reductions in net interest income, which fell to $2.1 billion from $2.9 billion a year earlier.

Group profit improved from $2.2 billion to $2.5 billion in the quarter, assisted by flows from other forms of income, including gains on securities trading and share of profit in associate Sagicor Financial Company, a regional insurance conglomerate.

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