The Payment Services Act (No. 2 of 2019) (Act) became law on 14 January 2019. The Act consolidates Singapore’s current regulatory frameworks for payments into a unified, expanded framework. The Act will become effective on a future date to be specified by the Minister-in-charge of the Monetary Authority of Singapore (MAS).

The Act reflects core principles developed by MAS over a two-year period in two public consultations:

• Regulation should be calibrated according to risk
• Regulation should be activity-based, not product-based
• Retail payment activities should be subject to a consolidated, enhanced licensing scheme
• A designation scheme should apply to systemically-important payment systems and to protect competition and efficiency

Regulated Payment Services

The Act focuses on seven retail payment activities by service providers that deal directly with consumers or merchants:

• Account issuance service: issuing accounts used to initiate or execute payment transactions.

• Domestic money transfer service: accepting money to execute or arrange a payment transaction from or through a payment account, a direct debit or credit transfer through a payment account or a transfer to another person’s payment account, in each case between a payer and a payee in Singapore.

• Cross-border money transfer service: accepting money in Singapore for transfer to any person outside Singapore or receiving money from outside Singapore for any person in Singapore.

• Merchant acquisition service: accepting and processing a payment transaction for a merchant in Singapore (or under a contract entered into in Singapore) that results in a transfer of money to the merchant, regardless whether the service provider holds or possesses the money.

• e-money issuance service: issuing e-money to any person to enable the person to make payment transactions.

• Digital payment token service: dealing in digital payment tokens or facilitating the exchange of digital payment tokens.

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

Among others, the Act specifically will not regulate payments by cheque, cashier’s order, etc.; payments between members of a payment system; payments between payment service providers for their own accounts; and services provided by technical service providers that do not possess the payment service’s money. The Act also will not regulate services in respect of ‘limited purpose e-money’ or ‘limited purpose digital payment tokens’.  It is important to note that ‘money’ includes e-money but not digital payment tokens.

The following table illustrates how the Act will consolidate and expand the current regulatory frameworks.

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‍Licensing Regime

A payment services provider will hold only one licence under the Act which will cover all its approved payment services. A provider must apply to vary its licence to add new payment services.

The Act will offer three licence classes:

• Money-changing licence
• Standard payment institution licence
• Major payment institution licence

As its name suggests, the money-changing licence will only permit the licence holder to provide money-changing services. Any or all payment services, including money-changing, can be provided under the other two licence classes. A major payment institution licence will be required if the licensee provides services that exceed specified financial thresholds. Holders of standard payment institution licences must monitor their financial metrics and apply to upgrade to a major payment institution licence within a prescribed grace period when they cross a threshold.

Institutions such as banks and finance companies already licensed by MAS under separate legislation will be exempted from needing a licence under the Act to provide any payment service, but certain provisions of the Act will continue to apply to them as if they held a licence under the Act.

Other important details concerning the licensing regime, including minimum capital requirements, will be set out in subsidiary legislation expected to be proposed by MAS in a consultation exercise later this year.

Payment Systems

A ‘payment system’ is a funds transfer system or other system that facilitates the circulation of money. Payment systems are currently regulated under the PSOA.

Under the PSA, regulation of non-designated payment systems will be limited to MAS having the authority to require a participant to provide information at MAS’s request. MAS may designate any payment system as a ‘designated payment system’ if either:

• Disruption of the payment system would disrupt participants, cause systemic disruption to Singapore’s financial system or affect public confidence in Singapore’s payment systems or financial system or
• Designation is necessary to ensure efficiency or competition

Regulation of designated payment systems include an obligation to notify MAS of certain events, including new businesses and acquisitions, and MAS having the right to approve transfers of the business, persons becoming controllers of the licensee and appointments of CEOs and directors.

The Act also empowers MAS to impose a fair and non-discriminatory access regime on a relevant payment system that MAS has found to unfairly exclude potential participants. A ‘relevant payment system’ is a designated payment system or a payment system operated by a major payment institution or a person exempt from licensing under the Act.

Transition

The Act includes transitions for current licence holders under the MCRBA and the PSOA and grace periods for persons who will require new licences.

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