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In line with her “Smart Nation” initiative and its
vision to be the regional ‘FinTech’ hub, Singapore has
continuously encouraged financial innovation. While FinTech carries
tremendous potential to revolutionize the financial industry and
change lives for the better, if left unchecked, it also poses real
risks in the market, and the lack of comprehensive regulation for
this evolving market may lead to problems which affect market
integrity and consumer protection. As such, in encouraging FinTech
revolution, Singapore also places emphasis on mitigating risks
brought by FinTech through regulatory reforms and institutional
improvements together with industry players.

Further, the rise of FinTech has also resulted in considerable
change in the payment services landscape, presenting new risks that
arise from activities beyond the scope of the repealed laws(1)
governing such services. This led to the enactment of the Payment
Services Act 2019 (PSA), which came into effect on 28 January
2020.

PSA was introduced to streamline payment services under a single
legislation with the main aim of promoting greater confidence among
consumers and merchants to adopt electronic payments. It addresses,
amongst others, money-laundering and terrorism financing; loss of
funds owed to consumers or merchants; fragmentation and limitations
to interoperability; and technology and cyber risk management
requirements.(2)

In this article, we will set out the licensing framework under
the PSA as well as exploring the new developments in the payment
services landscape in Singapore.

Regulated Services and Licenses

As mentioned in our introductory article(3), PSA adopts an
activity-based approach in regulating seven types of payment
services:

  • Account issuance service: The service of issuing a payment
    account or service relating to any operation required for operating
    a payment account(4).

  • Domestic money transfer service: Provision of local funds
    transfer service in Singapore.

  • Cross-border money transfer service: Provision of outbound or
    inbound remittance service in Singapore.(5)

  • Merchant acquisition service: The service of processing payment
    transactions from the merchant and processing payment receipts on
    behalf of the merchant(6).

  • E-money issuance service: The service of issuing of e-money for
    the purpose of allowing the user to make payment transactions,
    including to pay merchants or transfer to others(7).

  • Digital payment token (DPT) service: The service of dealing in,
    or facilitating the exchange of, DPTs.

  • Money-changing service: The service of buying or selling
    foreign currency notes.

Accordingly, most providers of e-money and e-wallets will be
regulated for account issuance, domestic money transfer and e-money
issuance services. Merchant acquirers that process payment
transactions for merchants will fall under merchant acquisition
service. Entities that buy or sell DPTs (commonly known as
cryptocurrencies) or provide a platform to allow users to exchange
DPTs are regulated under DPT service. As for moneychangers and
remittance agents, they will continue to be regulated as
money-changing service providers and cross-border payment service
providers respectively.

Payment service providers can conduct multiple payment services
under one license. Depending on the types of services, a service
provider is required to hold either a (1) money-changing
license(8), (2) standard payment institution license, or (3) major
payment institution license. In relation to payment institutions,
the key eligibility criteria are summarised as follows:










Standard payment institution licensee

Major payment institution licensee

Thresholds It may only conduct regulated payment services that fall below
the following specified thresholds: (i) S$3 million monthly
transactions for any payment service (other than e-money account
issuance and money-changing services). (ii) S$6 million monthly
transactions for two or more payment services (other than e-money
account issuance and money-changing services). (iii) S$5 million of
daily outstanding e-money.
It may conduct any combination of the regulated payment
services without being subject to these specified thresholds.
Minimum base capital S$100,000 S$250,000
Place of business and directors To secure a license under the PSA, a licensee must be a
Singapore-incorporated company or a foreign corporation having a
permanent place of business or registered office in Singapore.
Its’ board of directors should have either: (i) at least one
executive director who is a Singapore citizen or Singapore
permanent resident; or (ii) at least one non-executive director who
is a Singapore citizen or Singapore permanent resident and at least
one executive director who is a Singapore Employment Pass
holder.
To secure a license under the PSA, a licensee must be a
Singapore-incorporated company or a foreign corporation having a
permanent place of business or registered office in Singapore.
Its’ board of directors should have either: (i) at least one
executive director who is a Singapore citizen or Singapore
permanent resident; or (ii) at least one non-executive director who
is a Singapore citizen or Singapore permanent resident and at least
one executive director who is a Singapore Employment Pass
holder.

Every licensee under the PSA must also adhere to the ongoing
compliance obligations, such as audit, cyber hygiene and Anti-Money
Laundering and Countering the Financing of Terrorism requirements
set out under the notices and guidelines issued by the Monetary
Authority of Singapore (MAS) from time to
time. A licensee is also required to pay an annual license fee and
the applicable fees(9) in respect of each type of payment service
(except account issuance service) that it is licensed to
conduct.

One should also note that licensees under the PSA are prohibited
from engaging in banking activities, such as lending to individuals
or sole proprietorships. Likewise, e-money issuers are prohibited
from on-lending customer money or using customer money to
materially finance their business activities; and e-wallet
providers are prohibited from providing cash withdrawal
services.

What’s Next for PSA?

Payment services ecosystem is a fast-evolving landscape in
Singapore and globally. The regulators in Singapore are always
watching out for emerging services and activities. In doing so, the
regulators have been actively pursuing the objectives of promoting
financial innovations as well as maintaining market integrity with
measures to mitigate new risks bought by the development of
FinTech.

One of the notable examples is the ‘buy now, pay later’
(BNPL) scheme, which has become a new
trend in the e-commerce space. BNPL is not regulated by under the
PSA, and MAS has been counting on industry self-regulation to
manage the risks for now. That said, a code of conduct for the BNPL
industry will be launched soon setting out the expectations
required of BNPL providers.(10) Such code may potentially require
BNPL providers to provide safeguards against ‘financial
imprudence’ and over-indebtedness by consumers, for instances,
setting a minimum age of BNPL users, a cap on the interest and late
fees, and imposing a ‘freeze’ on making further BNPL
purchases once consumers miss a payment. MAS has not ruled out the
need for regulation yet and will keep monitoring the development in
this space.

MAS is also actively studying the stablecoins’ market.
Stablecoins combine the credibility of fiat currencies with the
advantages of the blockchain. However, stablecoins do not fall
under a specific category currently regulated by the PSA. Though
MAS has indicated that in general stablecoins do not meet the
definition of “e-money” and it may meet the definition of
DPT, MAS is currently taking a ‘technology-neutral’ stance
and will examine further the characteristics of stablecoins.(11) As
stablecoins are gaining popularity in the market, we anticipate
that MAS will be looking to roll out the new regulations to
regulate such innovative products.

Not all payment services are regulated under the PSA. MAS
applied a risk-based approach to identify payment services that
pose sufficient risk to warrant regulation. As such, it is expected
that more regulations and guidance will be introduced to regulate
the payment services landscape in Singapore as and when the
regulators deem necessary. As such, every licensee should keep
abreast of the regulatory changes to ensure that it is providing
payment services in compliance with the laws.

Footnotes

1 Previously, the Payment Systems (Oversight) Act
provided for the oversight of payment systems and stored value
facilities, whereas the Money changing and Remittance Businesses
Act provided for the regulation of persons who carried on
money-changing business, remittance business or both. These two
legislations have since been repealed after the commencement of the
PSA. Domestic money transfer service, merchant acquisition service
and DPT service are new payment services that are regulated under
the PSA.

2 MAS, “Consultation Paper on Proposed Payment
Services Bill” (November 2017) Monetary Authority of Singapore
Consultation Paper No P021-2017, at https://www.mas.gov.sg/-/media/MAS/resource/publications/consult_papers/2017/Consultation-on-Proposed-Payment-Services-Bill-MAS-P0212017.pdf.

3 Article titled [“Fintech today – A look at
Fintech regulatory environment, and what you need to know”
published by Withers KhattarWong on 11 May 2022.]

4 Including non-bank issued credit card and e-wallet
(including certain multi-purpose stored value card).

5 Including payment gateway services, payment kiosk
services or other local funds transfer, in any case neither payer
nor payee is a financial institution.

6 Including provision of a point-of-sale terminal or
online payment gateway.

7 The provision of stored value facilities is now
regulated under the PSA as account issuance service and e-money
issuance service.

8 A money-changing licensee can conduct only
money-changing services.

9 Moneychanger is required to pay a fee of S$1,500.
Standard payment institution is required to pay S$5,000 per payment
service whereas a major payment institution is required to pay
S$10,000 per payment service. However, no such fee is payable by
any licensee in respect of account issuance service.

10 https://www.singaporelawwatch.sg/Headlines/Buy-now-pay-later-schemes-to-come-under-industry-code-to-protect-consumers.

11 FAQs on the PSA (revised on 7 March 2022), available
at https://www.mas.gov.sg/-/media/MAS-Media-Library/regulation/faqs/PD/faqs-on-payment-services-act-2019/Payment-Services-Act-FAQ—7-March-2022.pdf.

12 ibid.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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