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MAS has submitted a new Payment Services Bill to Parliament which aims to combine the current regulatory frameworks relating to payments into a single activity-based framework. The Bill, also known as the PSB, brings together the Payment Systems (Oversight) Act and the Money-changing and Remittance Business Act. If you are likely to be affected, now is a good time to check your compliance frameworks and figure out if you need to apply for a new license.
The wider scope of regulated activities
The PSB will expand the scope of regulated activities. Initially, the regulated activities included stored value facilities, remittance, and money changing services. Under the bill, they will include both traditional and newer forms of payment service providers. The new regulated activities are below:
- Account issuance services
- Domestic money transfer services
- Cross border money transfer services (remittance business)
- Merchant acquisition services
- e-money issuance service
- Digital payment token service
- Money-changing service.
Regulatory framework
The PSB provides for two parallel regulatory frameworks for retail payment services and for interbank payment services, such as FAST, GIRO and MEPS+.
Under the interbank payment service, MAS has proposed for a designation regime for payment systems whose disruption would pose financial stability risks or impact confidence in the financial system. These payment systems will be designated for regulation. These only apply to payment systems that pose financial stability concern to Singapore.
Under retail payment services, there is a modular licensing regime, depending on the type of payment activity engaged and the level of transactions. If an entity exceeds transactions value of S$3 million a month, they must hold a Major Payment Institution licence.
A provider can be classified as:
- Money Changers – only allowed to provide money-changing services
- Standard Payment Institution – only subject to AML/CTF requirements, basic corporate governance and other requirements of general application such as cyber hygiene
- Major Payment Institution
MAS is of the view that this will avoid unduly burdening smaller entities with regulatory requirements and run counter to their goal to promote innovation and competition. This also gives the opportunity for smaller entities to grow their business and gives consumers greater access to various types of services, as smaller entities come into the market.
In order to mitigate the risks associated with the lesser regulatory requirements, MAS will impose disclosure requirements to safeguard consumers. These disclosure requirements are still undergoing consultation.
Risk mitigating measures
MAS will impose the following risk mitigating measures under the Payment Services Bill:
- AML/CFT measures
- User protection measures
- Powers to impose interoperability measures
- Technology risk management measures.
AML/CFT measures will apply to all three classes of licensees whereas the other measures will only apply to Major Payment Institutions.
Existing financial institutions
The PSB will have an impact on financial institutions such as banks, merchant banks, finance companies and non-bank credit card or charge card issuers. To cushion the impact of the new bill, MAS has provided for exemptions for these financial institutions, as they already hold a licence and subject to regulatory requirements.
MAS has also provided for transitional arrangements for other existing financial institutions and payment providers. Most importantly, all those under the previous acts must comply with the requirements when the Payment Services Bill commences. This includes remittance agents and money changers. To provide sufficient lead time, MAS will accord a 12-month grace period for all payment services, except digital payment token services and money changing services.
MAS will deem widely accepted Stored Value Facility holders and remittance agents as Major Payment Institutions. These entities will not need to separately apply for a payment services licence. They must notify MAS of the specific activities they are conducting, within the period of time stipulated by the MAS.
Payment Services Bill for newly regulated entities
MAS will also provide an exemption for entities providing services that are regulated, from the requirement to hold a licence for an interim period. New entities should submit the licence application to MAS within 12 months from the commencement date of the Bill. These entities must disclose clearly that they are within the exemption for an interim period.
How we can help
For entities who need to be newly licensed, we can help with obtaining the necessary licence with the MAS for any of the new regulated activities. We can also set up your Compliance Framework to ensure that you will meet MAS requirements.
For existing institutions, we can help to review your Compliance Framework to ensure that it meets the new regulatory requirements under the Payment Services Bill.
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