Local remittance providers say most customers are unlikely to feel the effects of the new US-based tax on money transfers, citing strong digital adoption by consumers and years of investment in alternative remittance channels as key buffers.

The one per cent excise tax, signed into law under President Donald Trump’s “Big Beautiful Bill”, will take effect on December 31, 2025 and applies only to cash-based remittances, such as those sent using physical cash, money orders, or cashier’s cheques. Transfers made through US bank accounts, debit or credit cards, or approved digital platforms will remain exempt.

Local money transfer providers say that distinction will make all the difference.

“This is not a time for fear. It’s a time to stay informed and take advantage of the options available to us,” Margaret Campbell, president of the Jamaica Money Remitters Association (JMRA), said in a press statement last week following the announcement.

The tax was initially proposed at five per cent, but was ultimately reduced to one per cent following negotiations in the US Congress.

Jamaica received US$3.36 billion in remittance inflows in 2024, a modest 0.4 per cent decline from the previous year. About 67.3 per cent of those funds originated from the United States, according to Bank of Jamaica data. While the bulk of remittances now move through digital channels globally, a significant number of Jamaicans — especially in rural areas or among older populations — still rely on cash pick-up at remittance agents.

It’s that group the JMRA says it is focused on supporting in the months ahead.

“Digital remittance services are safe, secure, and in many cases more affordable,” Campbell said. “We want Jamaicans to know they have options — options that won’t cost them more under this new tax.”

“Collaboration with financial institutions is ongoing,” she told the Jamaica Observer. “The industry is focused on working together to simplify onboarding and improve access to digital channels for remittances for all Jamaicans, regardless of location or financial status.”

Several industry players are already well advanced in that transition. GraceKennedy, one of the island’s largest remittance providers, launched its GK One digital platform in 2022, offering users the ability to send and receive money digitally, link to a prepaid Visa card, and access funds around the clock. The company has also invested heavily in its digital factory and customer onboarding programmes to encourage migration to its app.

“We are in active dialogue with them as we assess how best to support our customers through this transition, especially in promoting the benefits of digital channels,” Campbell, who also heads GraceKennedy Money Services, agents for Western Union in Jamaica, told Sunday Finance.

Similarly, Lasco Financial Services, an agent for MoneyGram, has been promoting the LascoGold Visa Prepaid Card since the height of the COVID-19 pandemic, enabling customers to receive funds directly to their cards without visiting a branch. By 2022, over 50 per cent of Lasco’s remittance transactions had shifted to electronic channels, with the company continuing to build on that digital base.

At JMMB Money Transfer, most customers still collect their remittances in person. Chief Executive Officer Sharon Gibson told Sunday Finance that approximately 70 per cent of inbound transactions are still fulfilled through cash pick-up, while the remaining 30 per cent are handled via digital options, including the company’s Visa prepaid card.

Still, she said interest in the digital product has been strong.

“Many of our clients have migrated from the cash pick-up disbursement channel,” Gibson said, adding that the prepaid card allows for 24/7 access, with funds typically available within five minutes of being sent once regulatory checks are complete.

She also described the expected impact as marginal, noting that the average remittance amount of US$350 would attract a US$3.50 charge or $546 in local currency, which is not expected to be a deterrent.

“If the sender absorbs the fee, the recipient still gets the full amount. If not, the deduction is marginal,” she said. “For higher-value transactions, especially those still being done at in-person locations, we expect to see a faster shift to digital.”

That shift, already in motion since the pandemic, is now being seen as a critical advantage. Unlike in 2020, when the industry scrambled to meet demand for contactless transactions, companies are now equipped with purpose-built apps, agent-assisted onboarding, and card-based infrastructure.

Campbell said JMRA members will also step up public education in the months ahead, particularly for Jamaicans who are unbanked or unfamiliar with digital tools.

She added that while it is still too early to quantify the full impact of the tax on transaction volumes or fees, the association is working closely with international partners — including Western Union, MoneyGram and Ria — to minimise any adverse effects on customers.

Still, while providers are confident that the formal sector is ready, some analysts remain cautious.

A review by the Center for Global Development suggests that even a one per cent increase in remittance cost could lead to a 1.6 per cent drop in formal transfer volume, as senders seek cheaper or informal options. Jamaica’s flat growth last year contrasts with countries like Guatemala and El Salvador, which posted remittance increases of 8.6 and 1.7 per cent, respectively.

The report noted that if consumers revert to underground channels to avoid costs — even modest ones — it could undermine financial inclusion efforts and reduce transparency in the flow of foreign exchange.

“The JMRA strongly discourages the use of informal channels. We’re emphasising secure, compliant alternatives and will continue public education to reduce risk and misinformation,” Campbell said.

Margaret Campbell, president of the Jamaica Money Remitters Association and CEO of GraceKennedy Money Services, says the industry is prepared to guide Jamaicans through the transition to digital remittances ahead of the new US tax on cash transfers.

Sharon Gibson, CEO of JMMB Money Transfer, says the new US remittance tax is not expected to significantly affect most customers, noting that the average transfer would attract a minimal charge of US$3.50 or $546 in local currency.