Tech, digital push driving remittances to new normal
Over the past five years, the remittance market has seen the “steady adoption of new technologies”, and as more persons opt for the formal system to transfer money to family members, there is optimism that the record inflows reached under the pandemic will become the new normal.
Remittances approached but did not breach the US$3-billion mark in the advent year of the coronavirus pandemic, but climbed well above it in the subsequent period to a historic high of US$3.5 billion in 2021 then inched back to US$3.44 billion last year.
Prior to the pandemic, annual inflows were maintained in the low US$2-billion range.
The service is still mainly characterised by walk-in traffic, but Jacinth Hall-Tracey, managing director of Lasco Financial Services Limited and past president of the Jamaica Money Remitters Association, is projecting that in three years, the majority of the flows will come through digital channels.
Most of the business is handled by remittance companies, among which the Western Union franchise operated by GK Money Services and MoneyGram have the most extensive networks, while the banking sector handles 14 per cent of the business. In total, there were eight primary remittance agents in operation last year.
In the pre-pandemic period, the level of remittances equated to 15 to 16 per cent of GDP, but that ratio climbed to 21 per cent in 2020 and 19.5 per cent in 2021, according to data collated by the central bank, which regulates the sector.
Additionally, money flows had trailed tourism expenditures by a third, but with the lockdown of the travel market and decimation of the hospitality sector in the pandemic year, remittances overtook tourism as Jamaica’s top source of foreign flows.
Money transfers were outperforming tourism initially at a ratio of 206 per cent in 2020 but were last tracking at 135 per cent in 2021 as the travel and hospitality sectors began to rebound.
Sharon Gibson, CEO of JMMB Money Transfer, said that last year, there was a big climb in the use of digital channels to receive remittances, which was up 35 per cent in the company’s fiscal period. Digital pay-outs are usually deposited to recipients’ bank accounts.
Part of the shift, she noted, might be due to the convenience of doing business via mobile channels and issues of safety.
Still, Gibson said the majority of the transactions, 60 per cent, is still due to walk-in customers, some of whom might lack formal banking relationships.
“With increased travel and relaxation of restrictions in the source countries, like the USA, there may be a change in digital remittance options used by senders in these markets. We will have to continue to assess if this trend continues to determine if this reflects an overall change in the industry and client behaviour,” she said.
Hall-Tracey affirmed that the pandemic had bought a shift in the market. Concurrently, there has been “a steady adoption of new technologies, making sending and receiving funds more convenient and affordable,” she added.
“The pandemic would have forced many customers who would normally receive hard cash remittances from family members and friends to send via formal channels such as MoneyGram and RIA,” Hall-Tracey said of services offered by Lasco.
“This shift was mainly driven by a global travel restriction that prevented movements across borders. Jamaica’s main sending corridors being the United States, Canada, and the United Kingdom were all affected. As the once informal recipients introduced themselves to our services because of the convenience and now familiarity with the service, they just keep returning,” she said.
That shift was facilitated by the opening up of digital channels that were tentatively received at first but are now gaining in acceptance.
“Customers have been presented with new alternatives to send and receive their funds. Senders have been sending their remittances to Jamaica initiated through our remittance partners’ mobile applications and websites, which is more affordable and convenient relative to them using a retail outlet in the send country,” Hall-Tracey noted.
New scope for digital remittances has opened up even further with the advent of the Lynk and GK One app and digital wallets, and more innovations to come, including from JN Bank.
Lynk, which is owned by National Commercial Bank Jamaica, announced with fanfare in March that it had received central bank approval to offer remittances via the app. It said then that its remittance partner would be MoneyGram, with others to follow.
Just over a week ago, GraceKennedy disclosed to the stock market that it, too, had struck a deal with NCB in March to offer Western Union remittances via the Lynk app. That is in addition to offering remittances through its own GK One app since last November.
Beyond the digital space, Western Union remittances will also be offered through the Courts network of furniture stores that are owned and operated by Unicomer Jamaica.
Hall-Tracey said Lasco’s main remittance partner, MoneyGram Inc, has been driving senders to its digital channels and that this channel now accounts for the majority of the transfers being sent globally as well as to Jamaica.
But like JMMB: “The majority of our remittance customers are still collecting remittance through our agent network,” she said.
“We also note that a growing number of receivers are collecting their remittance in cash in our agent network then using the cash to top up their Lasco Gold Visa prepaid card, topping up their cards with a portion to spend later” and “our agent network is, therefore, able to remain relevant in a digital world, and customers get to collect based on their preference.”
The company’s prepaid card holders also have the option of receiving a top-up on their card from overseas, through Visa Direct.
“Since the launch of our cards less than one year ago, close to $1 billion has been loaded. The new technology allows our remittance agents and remittance customers to participate in the benefits,” Hall-Tracey said.
Margaret Campbell, the current president of the Jamaica Money Remitters Association and chief operating officer of GK Money Services, said the emergence of prepaid and digital cards will further drive an increase in transfers.
The GK One wallet also has a companion Visa prepaid card.
“The local remittance industry has always kept pace with emerging technology as we work to provide our customers with the most up-to-date and convenient options for sending and receiving money. During the COVID-19 pandemic, the digital transformation of our remittance industry was accelerated,” said Campbell.
“Customers easily transitioned to these new offerings, and this contributed to Jamaica recording its highest remittance inflows in history between 2020 and 2021. More recently, the introduction of digital wallets and pre-paid cards has led to a further modernization of the industry, and we are all excited about this new digital era,” she said.
Gibson added that with the changing technology, JMMB Money Transfer has seen vast improvement in the turnaround time for service delivery, with pay-outs happening in a “matter of minutes” and is looking to roll out other digital disbursement channels within a few months.