The Payment Services Act of Singapore

Existing payment systems, money-changing and remittance business activities are regulated under the Payment Systems (Oversight) Act (Cap. 222A) (PS(O)A) and Money-Changing and Remittance Businesses Act (Cap. 187) (MCRBA). The PS Act will amalgamate both the PS(O)A and MCRBA, enhance the scope of payment services that will be regulated, and calibrate new regulations according to the risks posed by such activities. This article will highlight some key updates and provisions under the PS Act that payment services providers should note.

Licensing Regime under the PS Act

The PS Act covers the following activities (the Activities):

• Activity A: Account issuance services;
• Activity B: Domestic money transfer services;
• Activity C: Cross-border money transfer services;
• Activity D: Merchant acquisition services;
• Activity E: Electronic money (e-money) issuance;
• Activity F: Digital payment token services;
• Activity G: Money-changing services.

Activities A, B, D and F are activities not currently regulated under the existing PS(O)A and MCRBA.

Under the PS Act, there will be three types of licenses that a person can apply for:

• money-changing licence;
• standard payment institution licence; and
• major payment institution licence.

A standard payment licence is required if a person carries on one or more of the Activities (except money-changing services), or two or more of the Activities (including money-changing services).

A major payment licence is required if:

• a person carries on one or more of the Activities (save for money-changing service or e-money account issuance service) and the average, over a calendar year, of the total value of all payment transactions that are accepted, processed or executed by the person in one month exceeds S$3 million (or equivalent in foreign currency) for any one of the Activities (save for money-changing service or e-money account issuance service) conducted or S$6 million (or equivalent in foreign currency) for two or more of the Activities (save for money-changing service or e-money account issuance service);
• a person carries on the business of providing e-money account issuance service and (i) the average, over a calendar year, of total value in one day of all e-money stored in any payment account issued by the person to a person resident in Singapore or (ii) the average, over a calendar year, of the total value in one day of all e-money that is issued in Singapore and is stored in any payment account issued by the person to a person resident outside Singapore, exceeds S$5 million (or equivalent in foreign currency); or
• a person carries on a business of providing e-money issuance service and the average, over a calendar year, of the total value in one day of all specified e-money issued by the person, exceeds S$5 million (or equivalent in foreign currency).

A money-changing licence will be required if a person carries on a business of providing a money-changing service unless the person has in force a standard payment institution licence or major payment institution licence that  entitles the person to carry on a business of providing a money-changing service.

Granting of Licence

A money-changing licence will only be granted by MAS to applicants if the applicant has a permanent place of business or a registered office in Singapore. MAS must also be satisfied that the applicant fulfills requirements to be fit and proper.

A standard payment licence and/or major payment licence will only be granted by MAS to applicants who satisfying the following key conditions:

• if the applicant is a company, or is a corporation formed or incorporated outside Singapore;
• the applicant has a permanent place of business, or a registered office in Singapore;
• an executive director of the applicant is a citizen or permanent resident of Singapore or satisfies such conditions prescribed by MAS; and
• MAS is satisfied that the applicant fulfills requirements to be fit and proper;

The following minimum financial requirements must be satisfied for applications of either a standard payment institution licence or major payment institution licence:

Type of Licence	Minimum Financial Requirement
Standard Payment Institution Licence	If the applicant is incorporated in Singapore, its base capital is not less than S$100,000.   If the applicant is a foreign company, its net head office funds are not less than S$100,000.
Major Payment Institution Licence	If the applicant is incorporated in Singapore, its base capital is not less than S$250,000.   If the applicant is a foreign company, its net head office funds are not less than S$250,000.

 

Certain Key Requirements and Conditions on Conduct of Business under the PS Act

Place of Business or Registered Office of Licensee

All licensees under the PS Act must have a permanent place of business in Singapore or a registered office in Singapore. For licensees that conduct any money-changing service or cross-border money transfer service, they must not carry on a business of providing any money-changing or cross-border money transfer service at any place of business other than the licensee's permanent place of business notified to MAS. If the licensee wishes to provide any money-changing or cross-border money transfer service at any place of business other than the licensee's permanent place of business notified to MAS, they need to apply in writing to MAS for approval.

Prohibition of carrying on certain businesses

A licensee must not carry on a business of granting any credit facility to any individual in Singapore.

A licensee that is entitled and does carry on a business of providing an e-money issuance service (a) must not lend many customer money; and (b) must not use any customer money, or any interest earned on any customer money, to finance wholly or to any material extent any activity of any business carried on by the licensee.

Major Payment Institutions

Every major payment institution must maintain security with the MAS of a prescribed amount for the due performance of the obligations of the major payment institution to every payment service user who is a customer of the major payment institution. The security must be (a) in the form of a cash deposit; (b) in the form of a guarantee; or in such other form as MAS may allow.

A major payment institution that provides a domestic money transfer service, cross-border money transfer service, merchant acquisition service or any other payment service prescribed by MAS, must ensure that no later than the next business day after any relevant money is received from, or on account of, a customer, the whole or such part of the relevant money is safeguarded in one of the following manners:

• by an undertaking from a safeguarding institution to be fully liable to the customer for the relevant money;
• by a guarantee given by a safeguarding institution for the amount of the relevant money;
• by depositing the relevant money in a trust account maintained with a safeguarding institution.

Designation of Payment Systems

Payment systems are widely used in Singapore and operations of one payment system may have an impact on one or more other payment systems. MAS has the discretion and necessary powers under the PS Act to designate a payment system as a designated payment system if MAS is satisfied that any of the following consideration applies:

• a disruption in the operations of the payment system could (i) trigger, cause or transmit further disruption to participants of the payment system; (ii) trigger or cause systemic disruption to the financial system of Singapore; or (iii) affect public confidence in the payment systems of Singapore or the financial system of Singapore;
• the payment system is widely used in Singapore or the operations of the payment system may have an impact on the operations of one or more other payment systems in Singapore, and the designation is necessary to ensure efficiency of competitiveness in any of the services provided by the operator of the payment system; or
• the designation is otherwise in the interests of the public.

Designated payment systems are required to comply with requirements prescribed under the PS Act including any conditions or restrictions that MAS thinks fit and imposes by notice in writing on a participant, operator or settlement institution of a designated payment system.

Transitional Arrangements after the PS Act is effective

Persons who before or on the commencement date of the PS Act  carry on specified Activities, and who meet the conditions for such activity, are exempted from holding a licence for a specified grace period. The exemption is only limited to persons who have actually commenced such regulated business on or before the commencement date of the PS Act and have notified MAS of the date on which the business was commenced on, or within a specified period after the commencement date of the PS Act. The specified Activities, transitional periods and notifications requirements will be set out in the Payment Services (Exemptions for a limited period of time) Regulations. 

Conclusion

Singapore has kept abreast with technological advancements that have had a significant influence on our payments industry. With the PS Act, Singapore now has an updated, comprehensive and consolidated set of forward-looking laws, calibrated to assist MAS to be better equipped in regulating the payment services industry without stifling innovation.