Cash is king
Recipients prefer money in hand for remittancesSunday, October 24, 2021
Although there has been a strong surge in remittances to Jamaica since the novel coronavirus pandemic, most recipients are still choosing cash as the means to collect the money sent from overseas.
This was revealed by Managing Director of Lasco Financial Services Limited (LASF) Jacinth Hall Tracey at the company's annual general meeting held recently. Lasco Financial is one of the biggest remittance partners for Moneygram International, which is one of the main remittance entities used to send funds back to Jamaica. Moneygram's website was the largest generator of transactions in December 2020 ahead of Walmart Inc.
“The Lasco Pay card has multiplied in use between 2020 and, now, with significant growth. However, it is still not growing as much as the cash disbursements. Remittances grew by about 35 per cent, while the use of the card multiplied by 1,000 per cent, but the volume of cash that is going onto the card is not significant yet. We are still building,” Hall Tracey told shareholders.
Lasco Financial added Ria Money Transfer in 2019, with the company bringing Boss Revolution and Remitly to Jamaica recently. This has been part of the company's strategy to grow revenues from remittances, which is their biggest revenue earner. They introduced a Lasco Pay Mastercard in 2019 and recently a Lasco Gold Prepaid Visa Card to capture a greater segment of the unbanked population.
Remittance inflows into Jamaica have increased by 18 per cent to US$1.5 billion between April and August. However, there has been a slight moderation in remittance growth, with August seeing a 2.4 per cent decrease to US$272.7 million as stimulus funds in the USA decreases. The USA is Jamaica's number one source market with 70 per cent of inflows coming from the country, with Canada and the United Kingdom making up another 22 per cent.
The Western Union Company (WU) has seen an 8 per cent rise in revenue for the six months to US $2.5 billion. This has been primarily due to the rise in consumer-to- consumer (C2C) revenues by 9 per cent to US$2.18 billion. Transaction growth in the Latin America and Caribbean region was 42 per cent higher for the second quarter as more countries implemented stricter COVID-19 measures to contain the novel coronavirus pandemic. Western Union saw an 81 per cent growth in transactions in 2020, with digital money transfers making up 29 per cent of transactions and 20 per cent of revenue for the C2C segment. This was up from the 16 per cent of transactions and 14 per cent of revenue in 2019.
GraceKennedy (GK) Limited, which operates Western Union in Jamaica, has seen its money services segment grow by 18 per cent to $4.83 billion as more remittances come to Jamaica. Despite the market share of remittance inflow data for GK not being publicly known, older Bank of Jamaica (BOJ) papers indicate it is more than half of the entire market. GK noted in its most recent quarterly report that customer registration for digital services, direct-to-bank transactions, exceeded the same period in 2020 by 16 per cent. First Global Bank, its commercial banking subsidiary, opened more than 10,000 low-risk accounts in 2020 as a means to collect remittances and the Government's care package.
Even with all these new low-risk accounts and prepaid cards for people to receive money, there is still a substantial number of people collecting remittances in cash. This was exasperatingly visible during the recent government lockdowns when crowds would descend on Western Union locations to collect remittances due to the shortened week to do business.
Some recipients told Sunday Finance that, at any of the three Western Union locations in Mandeville they'd stand in a line which stretched around plazas for hours. Sometimes they'd reach close to the front to hear that cash was finished before getting inside. They also said that, when they attempted to sign up for the direct-to-bank transfer, two of the locations were always empty with the other location being unable to do the set-up.
Chairman of Mayberry Investments Christopher Berry recently tweeted that, “E wallet adoption in Jamaica will be low as wage-earners place a premium on the little cash they have.”
Some of the prepaid cards being touted in Jamaica carry monthly activity fees or fees for each transaction done. Even with the low-risk bank accounts being an option for people to receive their remittances without needing to leave home, the restrictions attached to those accounts and possible fears of other unknown fees detract people from wanting to join the formal system. This, along with the inability to understand digital systems, continue to act as reasons for people to collect their remittances in cash. This has been heighted by the increase in digital fraud as well.
Though growth in card usage has been slower than expected, Hall Tracey remains confident in the company's push to offer more services to their target market as a means to bridge gaps in the system. The company will be doing a full marketing campaign of its Lasco Biz, following its approval to move up a level in the BOJ's sandbox.
“We will be granting remittance payments on behalf of these two companies. We've been approved by the Bank of Jamaica and currently integrating them into our payment systems. We're at the end of the integration process and expect by December that we can put a card out. The entire process to develop the cards and system takes a couple months.”