MAS Payment Services Regulation
9 September 2019
The Payment Services Act, when it comes into force in Singapore, will provide a flexible framework by streamlining payment service under a single legislative framework. It is likely to bring many fintech firms into the scope of payments regulation for the first time. The Act has not yet come into effect, but anyone working in payment services should re-visit the detail of the act and associated consultation paper and guidelines to make sure they are ready for when it does.
The Payment Services are regulated by the MAS under the Payment Systems (Oversight) Act (PSOA) and the Money changing and Remittance Businesses Act (MCRBA). As of February 2019, The Payment Services Act 2019 (PS Act) was gazetted by Parliament but it has not come into effect as yet. And since then, the MAS issued a consultation paper for the Proposed Payment Services Regulations that, when it comes into force, will consolidate the existing regimes governing payment services under a single piece of legislation. The PS Act will also include several new activities that are, to date, unregulated. Once commenced, the Payment Services Act will provide a flexible framework by streamlining payment service under a single legislative framework.
Here are key takeaways:
Under the Act, there will be two regulatory frameworks available:
- A licencing framework for payment service providers; and
- A designation framework for significant payment systems.
Who’s in scope?
There are seven payment services to be regulated under the Act that would require to be licenced:
- Account issuance
- Domestic money transfer
- Cross border money transfer
- Merchant acquisition
- E-money issuance
- Digital payment token
- Money changing
There are three types of licence classes:
- Money changing
- Standard payment Institution
- Major Payment Institution
What is the difference between these licences?
The money changing licence will only allow 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. For standard payment institutions, these licensees must monitor their financial metrics and apply to upgrade to a major payment licence within a prescribed period when they cross a threshold. That threshold is transactions up to S$3 million for any payment service; or up to S$6 million for two or more payment services within 1 calendar year. A major payment institution licence will be required if the licensee provides one or more payment services, except an e-money account issuance service or a money-changing service; and the monetary threshold remains the same as those of a standard institution.
What does this mean for remittance and money changers?
The remittance businesses will now be regulated as providing cross-border money transfer services. Licensing requirements will extend to both inward (funds received into your bank account) and outward remittance businesses, as well as domestic money transfer services – that is accepting moneys for the purposes of executing or arranging for execution of certain payment transactions. These will now be regulated as providing domestic money transfer services.
Companies that are currently licensed by the MAS under the current regulatory framework may not need to re-apply for a licence. Instead, they will have six months from the date of the commencement of the new Payment Services Act to inform the MAS of the specific activities that they are conducting.
Consultation Paper on Payment Services Guidelines and Notices
In July, the MAS issued a Consultation Paper on Proposed Payment Services Notices and Guidelines. It sets out MAS’ proposed notices and guidelines applicable to entities regulated under the Payment Services Act 2019, to effect the objectives of the Act.
What are the takeaways from the paper?
- MAS proposes to issue 3 notices on reporting requirements under the PS Act:
- Submission of regulatory returns.
- Submission of Statements of transactions and Profit/Loss.
- Reporting of Suspicious Transactions.
- MAS technology risk management and cyber hygiene:
- The new notice on technology risk management (PSN05) will apply to operators and settlement institutions of designated payment systems (DPS) but will exclude Licensees until further consultation with the general public.
- Notice on cyber hygiene (PSN06) will apply to both Licensees and DPS. The Notice sets out the basic cyber security measures that FI’s would need to implement to establish a baseline for defenses against cyber threats.
- MAS Notice on Conduct (PSN07)
- PSN07 sets out conduct requirements across for all licenses in respect of payment services and certain exempt payment services providers.
- The MAS proposes to introduce three new types of conduct requirements – determining Singapore residency of customers, specifying days and hours for place of business to be manned and determining exchange rate for money to be safeguarded.
- MAS Notice on Disclosure (PSN08)
- This notice sets out disclosure and communication requirements to give customers accurate information about the extent to which the FI is regulated under the PS Act and whether customers money is safeguarded.
- The specific disclosures will differ depending on the licensees class, scope of exemption and payments service provided.
What other guidance is on the horizon and when do these Guidelines and Notices come into effect?
The MAS are extending the Fit and Proper Guidelines to include the above Licensees. The MAS will provide amendments to the e-payment user protection guidelines to apply to all MPIs (major payments institutions) and exempt payment service providers which will come into effect six months from the commencement of the PS Act.
The Fit and Proper Guidelines will come into force on the commencement date of the PS Act. To ensure the industry has enough time and notice, the MAS will send out a notification at least 4 weeks in advanced before the PS Act commences.
Bovill specialises in advising on MAS regulation and works with payment services providers across Asia, Europe and the US. Get in touch to find out more.