Driving change in cross-border payments

Small World is a Business Reporter client

Sending money home is important for millions of people around the world. Almost a billion people receive money from friends and relatives who have moved abroad or live outside their home country, and the value of these international payments (known as remittances) is more than half a billion dollars a year.

People move to new countries for a range of reasons – education, employment, escaping persecution or lack of opportunities at home – driven by a desire to build a better life. These migrants are part of the fabric of our global society, and many are motivated to send money home, in support of family, friends or investment projects. Unfortunately, transferring money to the developing world has not always been simple or cost-effective.

For the past 15 years, a UK home-grown business, Small World Money Transfer, has been on a mission to help its customers to transfer money quickly, securely and easily – online, in app, in-store or across a large agent network. An alumnus of the UK government’s Future Fifty programme, Small World has expanded from an initial team of two people to a global operation servicing customers around the world who need to send money, largely to countries in Asia, Africa and Central and South America. These customers are traditionally poorly served by traditional banks.

One problem that migrants face when they try to send money home has been ‘de-risking’ by the banking sector. Many traditional banks have withdrawn from providing banking services to companies that specialise in cross-border remittance services, largely due to the heavy burden of regulatory compliance relating to money laundering. As a result, the remittance business has consolidated into just a few global players with scale. Over the years, this has been very harmful to the underbanked.

Small World has an important part to play as a strong challenger to the global giants of the sector. They partner directly with banks around the world to provide remittance services. ‘It takes a lot of work and time to build out a network of banking partners and to keep their confidence and trust over many years,’ says Small World CEO, Nick Day. ‘But that’s the business we’re in, and we work with some of the largest banks worldwide. We are specialists and they understand that.’

The company is meeting a very real need, has a strong social purpose and has experienced rapid growth in recent years. Its customers can send money digitally or in person to any of 180 countries worldwide, paying funds directly to a bank account or mobile wallet or for collection at one of over 300,000 bank and post office branch locations.

Money transfers can be very expensive, especially for individuals sending money to other consumers across international borders. The average cost of sending $200 (£150) internationally was 6.4 per cent in 2020– with a hefty $13 taken from wages that are often low and hard-earned. In general, banks are the most expensive, with specialist payment service providers such as Small World among the most cost-effective.

Small World is actively driving down costs for its customers, with big investments in technology and automation – the average fee they charge for international payments is around $5 (£3.75) for a $400 (£300) transaction.

But customers looking to send money home don’t only want low fees. Small World’s four million customers are also looking for convenience in how they send and how their recipients receive the money. ‘We have an omnichannel approach,’ says Mr Day. ‘As well as our digital presence and our mobile apps, we have 84 dedicated branches across Europe and a large network of more than 10,000 agencies to serve customers. We also operate a number of call centres with specialist staff, covering the broad range of languages that our customers speak.’

The company takes the same flexible approach to making payments. Recipients can have money paid into a local bank account, in different currencies, or collect it as cash paid over a branch counter.

Where a bank account is unavailable or reaching a convenient bank counter impractical, the simplest and cheapest solution may be to use a digital wallet on a mobile phone. Small World’s services work equally smoothly with payments made to mobile wallets, and these services have grown rapidly in countries with limited banking infrastructure and widespread mobile usage.

These benefits mean that cost isn’t the only consideration. ‘A big part of our premise is not to force people to take the cheapest option,’ says Mr Day. ‘We give people a choice so they can choose the one that works best for them. Cash over the counter may be a bit more expensive than money directly into a mobile wallet, but it works better for some people.’

As well as providing people with choice so they can pick the most convenient method, money transfer needs to be simple, too – both for the sender and the recipient. Small World is highly focused on how customers experience its service.

It has a team of specialists in user experience, from design to engineering, and is constantly refining the service as well as launching new features and services to improve the ease of use for customers. Driven by data, this is a constant journey to deliver the best experience.

In addition, Small World addresses regulatory complexity. Money transfer is a highly regulated business. Remittance services typically need Central Bank approval and Small World is authorised to provide these services across Europe, North and South America, and much of Africa.

‘A lot of what we do is applying technology and data to simplify what is complex from a regulatory perspective,’ says Mr Day. ‘There are banking regulations for each territory, and each bank has its own requirements, which may vary by amount or type of payment sent. Our aim is to make sending a remittance convenient, straightforward and easy – with a low fee and a very competitive exchange rate.’

Regulations are important because they promote trust, and user confidence is very important in this industry.Funds that are being transferred may be essential for education, housing or medical fees. For peace of mind, the sender needs to know when the money has been received safely at the other end.

‘It’s important that the money gets there quickly, but there also needs to be good communication around the transaction,’ says Mr Day. ‘We provide that.’

Speed is also important. Someone sending money home wants the recipient to have rapid access, especially if the money is being sent to cover an emergency. Some traditional methods of transferring funds can take days to come through. For most customers, the ideal speed is measured in minutes.

This is where Small World’s close relationship with its banking partners comes into play, in what Nick Day calls its ‘plumbing’. Because there is no third-party network to deal with, transfers are rapid and low cost. ‘We have around 450 relationships with banks across the developing world,’ he says. ‘We are integrated into their systems and work directly with their treasury operations so we can put money straight into bank accounts and mobile wallets.’

Cross-border transfers will continue to grow in importance as global migration increases and wages rise around the world. The pandemic has slowed the pace of global movement in recent times, but the underlying drivers behind migration remain strong. Successful services will be underpinned by a deep understanding of migrants and the people they send money to, together with the ability to navigate a complex and changing ecosystem of regulatory and banking stakeholders. Small World’s customer insights and its focus on cost and convenience, combined with strong and trusted banking relationships around the world, gives it an ability to provide value and choice to its customers that is unmatched in the industry.

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Originally published on Business Reporter