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To stabilise revenue, Lasco Financial gets fourth remittance partner

Published:Wednesday | October 6, 2021 | 12:06 AMKarena Bennett/ - Business Reporter
Jacinth Hall-Tracey, managing director of Lasco Financial Services Limited.
Jacinth Hall-Tracey, managing director of Lasco Financial Services Limited.

Lasco Financial Services has formed an alliance with a fourth remittance service provider, Boss Revolution, in a move to grow volume transactions and stabilise revenue that the company says it could lose as online transaction fees get cheaper.

COVID-19 has changed the way funds are remitted to Jamaica, and it’s a trend that’s unlikely to change even with the passing of the pandemic.

At the height of the pandemic last year, money service providers began heavily promoting its online money transfer services, a transaction method that would allow the financial services company to keep earnings of the remittance segment of its business intact, as well as reduce the overall impact on the group from hard-hit segments like Lasco Financial’s microlending arm, Lasco Microfinance.

The option proved to be not just more convenient for senders, many of whom now conduct transactions from the comfort of the homes, but was seen as the better payment method for customers in the wake of social-distancing protocols in physical outlets. It also came with a big advantage for customers –transaction fees were less than half of fees attached to physical outlets.

Typically, the transactions fee in retail outlets runs US$8 per transaction, while online transactions carry a cost of US$4 per transaction, a portion of which is paid to Lasco Financial for its agent services.

It’s good business for those remitting funds, but the electronic service cuts out a chunk of revenue for Lasco Financial.

“We still have the ongoing concern of reduced fees from remittance partners,” Managing Director Jacinth Hall-Tracey told shareholders during the company’s annual general meeting last week.

Boss Revolution is just one of “a few new remittance partners” that Lasco Financial wants to lock in to increase market share, but also create a buffer against any fallout in revenue that the company may experience from consumers switching to online services.

A brand operating under global company IDT Corporation, Boss Revolution has retail outlets in all 50 states across the United States. The company, which also operates within the telecommunications space, provides remittance services from the US to Nigeria, Ghana, Kenya, India and Haiti.

Its deal with Lasco Financial would give Boss Revolution presence in Jamaica through Lasco Money Services, which operates 140 locations nationally. On the flip side, Lasco Financial expects to add 1,000 customers within the first year of its partnership.

“Boss Revolution is very unique. It’s a communications company that facilitates mobile top-up service, call plans, and so they are very close to the diaspora market; and it is that unique capability that we are looking to leverage,” Manager of Payment Services Ramon Davis told the Financial Gleaner.

The company expects to see business primarily flowing through Boss Revolution’s online channel, Davis said. Once sent, recipients of the money transfers have the option to collect the cash in-store, have it directly transferred to their bank accounts or deposited to their Lasco Pay prepaid Mastercard.

Lasco Financial also serves as an agent for MoneyGram, Ria Money Transfer and Remitly through its national network. Lasco’s remittance business segment grew aggressively last year, mostly on the back of one-off COVID-19 stimulus programmes that the United States granted to its citizens. Most of the remittances flowing to Jamaica emanate from the US. The performance of the remittance segment helped Lasco Financial swing from a loss of $57 million to annual profit of $157 million at year ending March 2021.

The company anticipates growth in its remittance business to continue in FY2022, but Hall-Tracey is concerned that the company could see a tapering off in segment performance from the double-digit revenue growth it experienced last year.

“So what are we doing for the new year? We have several new remittance partners to roll out, because we need to scale faster in order to compensate for the reduced fee per transaction. And of course, we need to monetize all those investments that we have been doing over the past two years,” the MD said.

The launch of Lasco’s prepaid Visa card issued by Lasco Pay, is still pending. The Visa card roll-out complements the company’s first product launched under the sandbox regime – a tech-driven cashless business model that was designed especially, but not exclusively, for business owners without bank accounts.

Lasco Financial’s unaudited first-quarter report showed that the company generated earnings of $75 million, 171 per cent above the corresponding period in 2020. Revenues grew to $591 million, up $52 million, or 9.7 per cent, over the corresponding three-month period in 2020, largely due to ongoing growth in the money services business.