The Payment Services Act (No. 2 of 2019) (PS Act) became effective on 28 January 2020.  The PS Act consolidates Singapore’s previous regulatory frameworks for payments into a unified, expanded framework.  The Monetary Authority of Singapore (MAS) administers the PS Act.

The PS Act reflects core principles developed by MAS over a two-year period in two public consultations that built on a 2016 in-depth survey of Singapore’s payments ecosystem:

• 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 (please see our earlier PS Act article for a summary of the PS Act’s provisions related to designated payment systems)

Regulated Payment Services

The PS 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: buying or selling digital payment tokens or facilitating the exchange of digital payment tokens.

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

Among others, the PS 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 PS 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 PS Act consolidates and expands the previous regulatory frameworks.

Licensing Regime

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

The PS Act offers 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 (MPI) licence will be required if the licensee provides services that exceed specified financial thresholds.  Holders of standard payment institution (SPI) licences must monitor their financial metrics and, when they cross a threshold, apply to upgrade to an MPI licence within a 30-day grace period.  Holders of MPI licences are subject to more stringent security, safeguarding of customers’ funds and e-money float measures than are holders of SPI licences.

Transitional Licences, Exemptions and Exclusions

The PS Act offers the following transitional licenses:

Persons granted exemptions under the MCRBA and PSOA will be similarly exempt under the PS Act.

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

Persons providing a payment service on 27 January 2020 (i.e., the day before the PS Act became effective) that was unregulated as of that date (for example, a domestic money transfer service) will be granted a temporary exemption from the requirement to hold a PSA licence if they notify MAS on or before 27 February 2020 of the date they began providing that service.  (Please see our article providing more information about that notification requirement.)  The temporary exemption is 6 months for providers of digital payment token services and 12 months for providers of all other eligible services.

Payment services provided by persons regulated under the SFA, the Financial Advisers Act (Cap. 110), the Insurance Act (Cap. 142) or the Trust Companies Act (Cap. 336) that are solely incidental to their regulated activities are not regulated under the PS Act.

Applying for a PS Act Licence

Unless a provider qualifies for an exemption or exclusion under the PS Act, they must obtain a PS Act licence before they begin to provide their payment service in Singapore.

MAS requires applicants for PS Act licences to submit a detailed application form supported by comprehensive shareholder information, a business plan, compliance policies and procedures, a risk assessment and financial statements, among others.  In addition, the applicant’s company must satisfy certain standards and its directors and CEO are subject to MAS’s approval.

Proposed Amendments to the PS Act

A public consultation on proposed amendments to the PS Act closed for comments on the day the PS Act became effective.  If implemented, those amendments would expand the scope of digital payment token services and money transfer services to include certain services that do not occur in Singapore or where the service provider does not possess the money or tokens being transmitted.  The proposed amendments would also authorise MAS to impose customer protection measures on providers of digital payment token services.  There is not yet a timeline for the adoption of those amendments.  Please see our recent article explaining the amendments proposed in this consultation.

For More Information

OrionW regularly advises FinTech clients on payment services regulation and licensing matters.  If you require assistance with preparing an application for a PS Act licence or if you have questions about the Payment Services Act, please contact us at fintech@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.

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