The Monetary Authority of Singapore (MAS) has recently commissioned a study of Singapore’s retail payments ecosystem in connection with developing a payments roadmap to 2020. The study identified two areas requiring focus: regulation and governance. As a next step in the process, MAS has issued a Consultation Paper, Proposed Activity-based Payments Framework and Establishment of a National Payments Council (P009-2016, August 2016), which sets out proposals in both of those areas.
MAS’s proposals in the Consultation Paper recognise the increasingly complex and integrated nature of the Singapore payments ecosystem as well as the impact of technological advances driven by FinTech businesses. The regulatory proposals include a new activity-based regulatory regime applicable to payment service providers. This is in contrast to the current regime, which focuses on regulating specific payment systems. The proposals are aimed at building public confidence and encouraging the use of electronic payments by enabling MAS to better address matters such as consumer protection, access, corporate governance, cyber security, interoperability, technology, and money laundering and terrorism financing.
MAS’s governance proposals are intended to improve interoperability among payment systems and establish a single forum, open to payment system users and providers alike, under the auspices of a National Payments Council.
The PPF is intended to be an activity and risk-based regulatory framework that is forward looking and will provide for licensing, regulation, and supervision of all relevant segments of the payments ecosystem and remittance businesses in Singapore.
MAS currently envisages that entities will only be required to apply for a single licence (which could cover multiple activities) under the PPF and that the licensing regime would only apply to payment service providers established in Singapore.
Under current proposals the PPF covers seven activities:
1. issuing and maintaining payment instruments, eg payment cards, payment accounts, electronic wallets, and cheques;
2. acquiring payment transactions, such as physical and online merchant acquisition services, merchant aggregators, and master merchants;
3. providing money transmission and conversion services, such as domestic and in-bound/out-bound cross-border remittance services, currency-conversion services, and virtual currency intermediation services.
4. operating payments communication platforms, such as payment gateways, payment processors, and kiosks;
5. providing payment instrument aggregation services, such as payment card aggregation and bank transaction account aggregation;
6. operating payment systems which facilitate the transfer of funds through processing, switching, clearing, and/or settlement of payment transactions; and
7. holding stored value facilities, such as prepaid cards and prefunded electronic wallets.
MAS intends to further develop the definitions of each of these activities and applicable requirements in response to future rounds of public consultation.
Concerns around models of governance, the interoperability of payment solutions and a perceived lack of input from payment services users on the demand side have all contributed towards the proposed establishment of a unified forum, the National Payments Council, which would be tasked with fostering innovation, competition and collaboration in the payments industry. The proposal mirrors existing structures already in place in countries such as the UK and Australia.
The proposed objectives of the NPC can be summarised under four main headings: governance and stakeholder engagement; coordination and implementation; research and surveillance; and advisory, policy and enforcement. The current proposals provide that the NPC will be chaired by a representative from MAS, with board members drawn in equal numbers from a wide spectrum of industry players on each of the payment services user and provider sides.
Under the proposals, MAS considers that the NPC will need to have the power to determine membership fees, and charge members for participation in the payment systems that it governs. No indication has been given as to the proposed level of any such fees. Furthermore, at this early stage, the scope of any sanctions to be made available to the NPC in the case of non-compliance by payment system operators or scheme participants is unclear.
MAS has requested feedback on the scope of payment activities to be regulated under the PPF and the broad mandate and composition of the proposed NPC by 31 October 2016. Details as to how to submit written comments are set out in the consultation paper.
Subsequent rounds of public consultation will seek feedback on specific policies and draft legislation, including requirements and applicability to various payment activities.
