Overview of Singapore Payment Services Bill

      Singapore Payment Services Bill- A Brief History

      The Monetary Authority Of Singapore (“MAS”) regulated various types of payment services under the Payment Systems (Oversight) Act, 2006 (“PS(O)A”) and the Money-Changing and Remittance Businesses Act,1979 (“MCRBA”).   Due to the considerable change the payment services landscape has undergone, beyond the scope of activities and type of risks regulated under the PS(O)A and MCRBA, a consultation paper was issued by the MAS on 25 August 2016 regarding the proposed activity-based payments framework and establishment of a National Payments Council, which proposed an activity-based regulatory framework to regulate entities operating within the payments ecosystem. This was followed by another public consultation on 2017. The feedback was supportive and the new Singapore Payment Services Bill (“PSB”) got introduced in the Parliament on 19th November 2018.

      The main premise of the enactment of the Singapore Payment Services Bill is,

      • to streamline payment services under single legislation,
      • widen the scope of regulated activities to take into account developments in payment services,
      • tailor regulations to tally with risks these activities pose by adopting a modular regulatory regime.

      In doing so, the regulators aim to instill greater confidence amongst the general public to adopt e-payments.

      Licensing for Payment Service Providers

      The Bill mandates that a person must be licensed to carry on business in providing any type of payment service in Singapore unless he is exempted in respect of that type of payment service.

      Under the Bill person who desires to carry on business in providing one or more types of payment service may apply for,

      • Money-changing License

      A person must hold a money-changing license if he carries on business in providing money-changing services only

      • Standard Payment Institution License and Major payment Institution License

      A person must hold a standard payment institution license or a major payment institution license if he is carrying any one or more of the following payment services or if he is carrying any one or more of the following payment services and Money Changing services

      1. account issuance services
      2. domestic money transfer services
      3. cross-border money transfer services
      4. merchant acquisition services
      5. e-money issuance
      6. digital payment token service
      • Major payment Institution License

      A person must hold a major payment institution license if,

      • the average over a year for any licensable activity accepted, processed or executed in a month, in respect of any the above said payment services exceeds $3 million or
      • the average over a year for two or more licensable activities accepted, processed or executed in a month, in respect of any the above said payment services exceeds $6 million

      These thresholds are not applicable to any money changing service and any account issuance service where each account issued stores e-money

      • Exempt Payment Service Providers

      Certain entities are exempted from the requirement of carrying a license to carry on a business of providing any payment service

      • a bank licensed under the Banking Act
      • a merchant bank approved as a financial institution under the Monetary Authority of Singapore Act
      • a finance company licensed under the Finance Companies Act
      • a person licensed to carry on the business of issuing credit cards or charge cards in Singapore under the Banking Act.

      But certain other provisions including provisions relating to the conduct of business will still be applicable to these entities.

      Base Capital Requirements

      Subsidiary legislation will set out the Base Capital Requirements. Businesses that fall within the “Major Payment Institution” category has a minimum base capital requirements of S$250,000. The Standard Payment Institutions has a minimum base capital requirements of $100,000.

      Designated Payment Systems

      Under this regime, MAS retains the power to regulate a payment system by designating it as Designated Payment System if a disruption in its operations could,

      • further, disrupt participants of the payment system
      • trigger or cause systemic disruption to the financial system of Singapore
      • affect public confidence in the payment systems of Singapore or the financial system of Singapore
      • if it is in the interests of the public
      • pose efficiency or competition concerns

      Risk Mitigation Measures

      Licensees who come under the purview of the bill is subjected to many risk mitigation measures some of which is mentioned below.

      • the major payment institution that provides payment services such as money transfer services or issue of e-money must safeguard money received from the customer by an undertaking or guarantee from a safeguarding institution or any other prescribed manner.
      • to reduce fragmentation of widely-used payment solutions, MAS have interoperability powers in the Bill which it may exercise where necessary.
      • mandate that any major payment institution adopt a common standard to make widely used payment acceptance methods interoperable
      • mandate any major payment institution’s participation in a common platform to achieve interoperability of payment accounts including wallets with pervasive customer reach.

      Transition Period

      For all payment services, there will be a grace period of 12 months to transition over to the requirements of the new Singapore Payment Services Bill. Businesses that carry out digital payment token services will have approximately 6 months for their transition due to the higher risk of money laundering and terrorist financing posed by these specific activities.

      What next to expect:

      In conclusion, it seems that the new Singapore Payment Services Bill will indeed take into account the risks posed by institutions and the activities they undertake, as a whole, prior to prescribing restrictions and/or limitations or mitigating measures in order to best protect the public and target market. This tallies with the regulators’ view of adopting a stance far too preliminary that could potentially limit the ease of doing business in Singapore, particularly with technology that may streamline the industry as a whole.

      How Argus (now Waystone Compliance) helps

      Argus (now Waystone Compliance) can help with your licensing, policies and procedures, and ongoing compliance, if you fall within any of the regimes mentioned above. If in need of further clarification, do reach out to us at [email protected] and we will be happy to answer your queries, whether this relates to this article or even any other regulatory compliance hurdle you may face.

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