eCommerce

Targeting Jamaica’s US$2.3 Billion in Grocery Remittances

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Remittance is money that is sent from one party to another. Broadly speaking, any payment of an invoice or a bill can be called a remittance. However, the term is most often used nowadays to describe a sum of money sent by someone working abroad to their family back home. The term is derived from the word remit, which means to send back.

Remittances have been growing rapidly in the past few years and now represent the largest source of foreign income for many developing economies. Remittance flows to Latin America and the Caribbean grew an estimated 6.5% to US$103 billion in 2020, supported by a recovering economy and a moderately improving labor market in the USA.

Jamaica is the second largest remittance earner in the Caribbean (behind Haiti) at US$3.3 Billion in 2021, representing about 25% of Jamaica’s GDP. It is estimated that about 70% of which is spent on food and personal care items, i.e. Groceries.

It is estimated that about 70% of remittances is spent on food and personal care items, i.e Groceries.

Traditional Remittance Process

A typical remittance transaction takes place in three steps:

  • The migrant sender pays the remittance to the sending agent using cash, check, money order, credit card, debit card, or a debit instruction sent by e-mail, phone, or through the Internet.
  • The sending agency instructs its agent in the recipient’s country to deliver the remittance.
  • The paying agent makes the payment to the beneficiary.

For settlement between agents, in most cases, there is no real-time funds transfer; the balance owed by the sending agent to the paying agent is settled periodically through a commercial bank. Informal remittances are sometimes settled through goods trade. The costs of a remittance transaction include a fee charged by the sending agent, typically paid by the sender.

Remittance 2.0

Banks have traditionally been the most common – and, in many cases, the only – means of sending money across borders. In turn, remittances constitute a significant revenue stream for many banks, which typically charge at least 7% of the sum transferred, although this figure can rise to as high as 20% in smaller migration corridors.

Since the global pandemic of 2020, there has been a massive expansion of fintech solutions and many fintech start-ups are keen to move into the remittances space, which is seen as having significant potential. 

The market is increasingly characterized by intense competition on fees, with different apps striving to outdo each other in terms of price reductions. Some have even cut remittance fees altogether. 

Grocery Remittances

During the pandemic, I was affected just like everyone else, and being in technology I started to look at how the local e-commerce & fintech spaces were rapidly evolving. One of the things I noticed was how much remittances was growing in 2020-21 and thought to myself; the majority of remittances aren’t reaching the recipient’s bank accounts, so where is it going?

I learned that it is estimated that over 70% of the money from remittances is spent on daily needs items such as food and personal care, which can be considered groceries. This figure in Jamaica was approximately US$2.3 Billion in 2021.

The Problems:

  • Transparency: The money being sent back home is done largely without transparency on how it is being used.
  • Unsafe: Recipients have to travel to agencies to receive the money.
  • Delivery: Recipients then travel to Grocery stores periodically to spend said money.

The Solutions:

  • Delivery: Solving island-wide same-day Grocery delivery in all 14 parishes.
  • eGrocery: An online storefront of grocery items, enabling online purchases from anywhere.
  • Social: Social Commerce tools that enable recipients to more easily request help from family, friends, and even followers in buying groceries.

Contributed by Franz Weathers eCommerce Newsletter.

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