How final month pricing increases signalled concern at Small World
On 18 June, remittances player Small World Financial Services – which traded in the US as Choice Money Transfer – formally entered special administration, having stopped all services on 10 June. The company’s sudden closure was relatively unusual for a company of its scale in the space – the latest available accounts (for 2022) showed £5.2bn processed and revenue of £137m.
However, a review of the 2022 accounts flagged warning signs. Most significantly, it contained the acknowledgment that if Small World was unable to grow sufficiently in 2023 and 2024 following a £20m investment from principal shareholders, it may not be able to meet all its obligations. The funding was intended to carry it through most of 2024, even in a downside case, but unfortunately that was insufficient to maintain it as a going concern.
That provided a sense of what is likely to have occurred over the past year or so, but analysis of our pricing data for Small World’s final month of operation also provides a sense of how this played out, showing various large price increases, presumably to try to raise short-term funds.
Our real-time pricing data is available on a corridor-level basis across all pay-in and pay-out types for different send amounts, with breakdowns for FX margin, fee margin and the combined total margin – often also referred to as the total cost. However, for the purposes of this analysis we used the daily average rates for the popular UK to Philippines corridor, sending £500, and averaged these on a weekly basis.
This shows that while the pricing for the market remained relatively stable over the month prior to the company’s closure, Small World increased much of its pricing going from being slightly above market averages for some payout types, to significantly above average for all payout types.
Transfers that were sent to bank accounts – likely one of the cheapest-to-deliver pay-out types for Small World – saw the sharpest increase in overall costs to customers during the period.
Small World is the second major money transfer company to cease trading this year, following the US-based player Sigue, which was ordered to cease activities in March over its declining financial position. Small World’s administrators have advised that they will be looking to return money owed to customers “as soon as possible”, although this will only happen following a review of all books and records. We hope as much is recovered as possible to help all those who have lost out, most significantly its remittance customers.
