SINGAPORE: To keep up with an evolving payment landscape and guard against emerging risks, a new regulatory framework for payment services was introduced on Monday (Nov 19).
Submitted for first reading in Parliament, the new Payment Services Bill will streamline regulations of payment services under a single activity-based legislation, while expanding the scope of regulated activities to include both traditional and newer forms of payment service providers.
The proposed amendments will provide a more conducive environment for innovation in payment services and ensure that risks across the payments value chain are mitigated, the Monetary Authority of Singapore (MAS) said in a statement.
Currently, the MAS regulates various types of payment services under the Payment Systems (Oversight) Act and the Money-Changing and Remittance Businesses Act, enacted in 2006 and 1979 respectively.
However, the payment services landscape has changed considerably in the past few years, leading to new risks from activities that fall beyond the scope of the current regulatory regime. New payment business models have also blurred the lines between activities regulated under these two Acts, the MAS said in previous press releases.
The Bill is set to replace this existing payments regime and when it comes into force, both Acts will be repealed.
The new legislation comprises two parallel regulatory frameworks: A designation regime that enables MAS to regulate systemically important payment systems for financial stability and efficiency reasons, and a licensing regime that focuses on retail payment services provided to customers and merchants.
One of the key changes fall under the proposed licensing framework where providers of payment services will only need one licence to conduct any or multiple payment activities.
There will be three classes of licenses, however. Depending on the type of payment activity engaged and the level of transactions done, a provider can be categorised as a money-changing licensee, a standard payment institution or major payment institution.
For instance, a major payment institution will be defined as permitted to conduct more than S$3 million in transactions on average per month, as well as having an average daily e-money float of more than S$5 million a year.
Payment activities have been broadened to encompass a wider range and are categorised into seven groups: account issuance, e-money issuance, domestic money transfer, cross border money transfer, merchant acquisition, purchase and sale of digital payment tokens, as well as money changing.
Each activity carries different risks and the Bill will differentiate regulatory requirements accordingly, instead of implementing a uniform set of rules.
Tailoring risk mitigating measures to specific payment services that a licensee provides will better safeguard customer and merchant monies, said the MAS in its press release. It will also ensure adequate controls against money laundering and terrorism financing risks, reduce fragmentation and strengthen technology and cyber standards in the payments space.
The introduction of the Bill will impact financial institutions, such as banks, merchant banks, finance companies and non-bank credit card or charge card issuers.
To cushion the impact for these entities, MAS will have a 12-month grace period for all payment services, except digital payment token services – an extension from the earlier proposed six months following requests to give new entities more time to adjust to the new framework.
Previous rounds of consultations also prompted MAS to insert provisions in the Bill to prohibit e-money issuers from any conduct similar to a deposit-taking business, such as money-lending, or prohibiting all licensees from conducting consumer lending. By requiring entities conducting such activities to have relevant licenses, the financial regulator said it seeks to ensure that risks are appropriately regulated.
“The Payment Services Bill will enhance the regulatory framework for payment services in Singapore, strengthen consumer protection and engender confidence in the use of e-payments,” said Mr Ravi Menon, managing director of MAS.
“The Bill also illustrates our shift towards regulation that is modular, activity-based and facilitative of growth and development in the Singapore payments landscape.”