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Remittance market still soft, companies jockeying for business

MoneyGram’s super-agent in Jamaica, Lasco Financial Services Limited, has faced several headwinds.

Higher MoneyGram commissions led to declining revenue per transaction, during Lasco’s past financial year, although remittance volumes increased by nearly five per cent.

For the reporting period ended March 2023, there was a 17 per cent decrease in commissions for Lasco Financial. By September, the company had turned its focus towards attracting more remittance clients to reboot the business.

GraceKennedy Group, operator of the Western Union franchise in Jamaica and the Caribbean, also reported headwinds for the remittance business line in 2022, and noted further in September 2023 that global conditions were still impacting its money services segment, especially money transfers.

Those signals from the remittance providers come amid a softening of Jamaica’s remittance market, which has seen a one-point dip in flows so far in 2023.

However, the global prospect for remittances is still fairly upbeat, notwithstanding a slowing of the pace of growth.

Despite the impact of higher inflation on remittance senders, the World Bank, in its latest Migration and Development Brief released on December 18, said remittances to LMICs – low and middle-income countries – grew at about 3.8 per cent in 2023.

This, it was stated, is a moderation from the high gains of the previous two years.

“Of concern is the risk of decline in real income for migrants in 2024 in the face of global inflation and low growth prospects,” the World Bank brief noted.

Altogether, remittance flows for LMICs are estimated to reach US$669 billion in 2023. For Latin America and the Caribbean, the projection is for growth of eight per cent to US$156 billion.

In Jamaica, however, so far remittances counted to September have dipped by 1.2 per cent year-on-year, from US$2.55 billion to $2.52 billion.

Western Union super-agent GraceKennedy, a top player in the remittance market, has been feeling the pinch for more than a year. Its money services segment reported a 20 per cent decline in pre-tax profits in 2022, partly due to reduced remittance inflows into Jamaica. The overall remittance market also ended the year on the decline.

Data from the Bank of Jamaica, regulator of the remittance sector, indicates that between 800,000 and one million individuals send money to Jamaica each month. In 2021, the year of the largest level of inflows historically, the central bank counted US$3.5 billion of remittances. The number of transactions also hit a historic high of just over 12.1 million.

One year later, the annuals flows dipped to US$3.44 billion and appear set to decelerate again this year.

Jamaica’s decline of 1.2 per cent year-to-date to September is in contrast with the gains made by top recipients in the region, namely: Mexico, up 9.4 per cent; Guatemala, up 8.3 per cent; and El Salvador, up 5.6 per cent.

Notwithstanding the market’s softness, the US$3 billion or more of flows annually is still an attractive space for service providers, with much of the emphasis being on digital channels.

To drive up business, GraceKennedy recently announced that it was partnering with the Lynk digital app on Western Union remittances, and was also opening up remittance windows across the national furniture and appliance chain of Courts stores to grow its physical footprint.

National Commercial Bank Jamaica, which officially took over the management of the Lynk mobile app and wallet in October from sister company TFOB 2021 Limited, is also positioning to grow its market footprint.

Currently, Lynk has one remittance partner – MoneyGram. However, in the early first quarter of 2024, the platform is set to expand when it incorporates Western Union as an additional partner.

In the final quarter of 2023, NCB also sought to increase remittance flows thorough Visa Direct, a global payment solution offered by payment card company Visa International for real-time and digital account to account transfer of funds.

Visa has teamed up with remittance providers such as Western Union, MoneyGram International, Remitly, and Paysend to utilise its platform for digital transfers.

“It is a way to send and receive money using debit, credit or prepaid cards through participating institutions in over 200 countries. Participants enter card information to send funds. Customers do not need to expose bank account information to receive funds,” NCB said of the Visa service.

“Businesses are also able to make push payments directly to cardholders almost anywhere in the world. Funds are credited in approximately 30 minutes,” the bank added.

On its Lynk platform, NCB said it assumed full control over the Lynk platform effective October 1, 2023, under a lease agreement with TFOB.

Lynk introduced its remittance service in March.

The mobile wallet has a user base of 250,000 and 10 per cent active user rate, but the level of usage for remittances alone was not disclosed.

“Each active user averaged 3.8 transactions per month, encompassing remittances, mobile top-ups, peer-to-peer transfers, and bill payments. By the end of the year, Lynk processed over 500,000 transactions valued at approximately $2 billion,” NCB said, with reference to its financial year ending September.

Worldwide, the United States continues to be the largest source of remittances. The top five remittance recipient countries in 2023, says the World Bank, are India, US$125 billion; Mexico, US$67 billion; China, US$50 billion; the Philippines, US$40 billion; and Egypt, US$24 billion.

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