Regulating FinTech: Singapore’s Payment Services Bill

MAS is looking to update and streamline payment services regulations to include virtual currency services and other innovations.

On 21 November 2017, the Monetary Authority of Singapore (MAS) circulated a proposed Payment Services Bill (Bill) for public consultation. The consultation closes on 08 January 2018.

The Bill is the culmination of a previous round of consultation in 2016 in relation to overhauling payment services regulations, which are currently encapsulated in the Payment Systems (Oversight) Act (Cap. 222A) and the Money-Changing and Remittance Businesses Act (Cap. 187). There is an acknowledgment that with the rapidly changing landscape and technological advances, there is a need for regulations to keep pace. The Bill intends to streamline the regulation of payment services under a single legislation, expand the scope of regulated payment activities to include virtual currency services and other innovations, and calibrate regulation according to the risks posed by these activities.

What activities will be regulated under the Bill?

  1. Account issuance services. This includes issuing, maintaining or operating a payment account in Singapore, such as an e-wallet or a non-bank credit card.
  2. Domestic money transfer services. This includes payment gateway services and payment kiosk services.
  3. Cross border money transfer services. Providing inbound or outbound remittance services in Singapore.
  4. Merchant acquisition services. This is where the service provider contracts with a merchant to accept and process payment transactions, which results in a transfer of money to the merchant. Usually the service includes providing a point of sale terminal or online payment gateway.
  5. E-money issuance in Singapore to allow the user to pay merchants or transfer e-money to another individual. This includes providers of stored value facilities.
  6. Virtual currency intermediary services. Buying or selling virtual currency, or providing a platform to allow persons to exchange virtual currency in Singapore.
  7. Money-changing services. Buying or selling foreign currency notes in Singapore.

What activities will not be regulated under the Bill?

  1. Payment transactions between the payer and payee executed through a commercial agent authorised to negotiate or conclude the sale or purchase of goods or services on behalf of the payer or the payee, but does not include payment transactions executed on an online marketplace.
  2. The professional physical transport of currency, including their collection, processing and delivery.
  3. Payment transactions consisting of non-professional currency collection and delivery as part of a not-for-profit or charitable activity.
  4. Payment transactions based on any of the following documents drawn on a person with a view to placing money at the disposal of the payee: (a) cheques, cashiers’ orders, drawing vouchers, dividend warrants, demand drafts, remittance receipts, travellers cheques or gift cheques; or (b) paper postal orders.
  5. Payment transactions carried out within a payment or securities settlement system between payment service providers and settlement agents, central counterparties, clearing houses, central banks or other participants in the system.
  6. Any service provided by any technical service provider, which supports the provision of payment services, where the provider does not at any time enter into possession of the money to be transferred, including (a) the processing and storage of data; (b) trust and privacy protection services; (c) data and entity authentication; (d) information technology; (e) communication network provision; and (f) the provision and maintenance of terminals and devices used for payment services.
  7. Payment transactions carried out between payment services providers, or their agents or branches, for their own account.
  8. Payment transactions between or among related corporations, where there is no intermediary intervention by any payment service provider unless the payment service provider is one of the related corporations.
  9. Any payment service provided by any person licensed approved, registered or regulated, including a person exempted from licensing, approval, registration or regulation, under any of the following Acts: (a) Securities and Futures Act (Cap. 289); (b) Financial Advisers Act (Cap. 110); (c) Trust Companies Act (Cap. 336); (d) Insurance Act (Cap. 142), where such payment service is solely incidental to or solely necessary for the person’s carrying on of the business in any regulated activity under the respective Act or Acts.
  10. Dealing in central bank virtual currency carried out by a central bank or financial institution.
  11. Facilitating the exchange of central bank virtual currency carried out by a central bank or financial institution.
  12. Any payment service provided by any person in respect of limited purpose e-money only.
  13. Dealing in limited purpose virtual currency.
  14. Facilitating the exchange of limited purpose virtual currency.

When the Bill is finalised and enacted, payment firms will only need to hold one licence under a single regulatory framework to conduct any or all of the specified payment activities. The regulation of licensees will be calibrated according to their activities based on the risks or regulatory concerns that they pose, namely: (a) money-laundering and terrorism financing; (b) user protection; (c) interoperability; and (d) technology risk. It is anticipated that there will be transitional arrangements in place, and allowances for newly-regulated entities to comply with the new regime.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.