Payment Services Act (PSA) FAQ
What is Payments Services Act (PSA)?
Payment Services Act (PSA) came into effect in Singapore on 28 January 2020 and it streamlines payment services regulatory framework under a single piece of legislation. MAS has introduced 2 parallel regulatory frameworks. The first framework is a designation regime which enables MAS to designate significant payment systems and regulate operators, settlement institutions and participants of these designated payment systems for financial stability reasons and efficiency reasons. The second framework is the licensing framework for payment service providers. Please see the article below written by our team for more details:
What are the different activities regulated under the Payments Services Act (PSA)?
The Payment Services Act (PSA) currently regulates the following 7 types of activities:
- Account issuance services
- Domestic money transfer services
- Cross-border money transfer services
- Merchant acquisition services
- E-money issuance
- Digital payment token services
- Money-changing service
Please see the article below written by our team for more details:
What other factors should applicants consider when deciding between a Standard Payment Institution Licence (SPI) and a Major Payment Institution Licence (MPI) under the Payment Services Act (PSA)?
If you conduct regulated payment services aside from money-changing, it will require a SPI or MPI licence depending on whether your current or expected business volume exceed the specified SPI thresholds.
Regardless of what licence you apply for, applicants must ensure that they meet the business needs for a reasonable period of time. For example, if you expect to exceed the specified SPI thresholds in a year, you should try to apply for an MPI at the get go, rather than a SPI licence. This is because if you exceed the threshold, you will have to apply for a license variation and this will take time, effort and additional money.
Please also note that you can only apply for one licence. You should not apply, for the same entity, an SPI licence for one activity and a MPI licence for another activity.
What happens if the legislation was interpreted incorrectly which results in an incorrect or incomplete Payment Services Act (PSA) application submission?
The Monetary Authority of Singapore (MAS) has assured in various industry seminars that the licence application process is an interactive and iterative one. The MAS officer assigned to the case will work with the applicant on the matters (if any).
Can a company be incorporated after the under the Payment Services Licence (PSL) is issued?
No. Monetary Authority of Singapore (MAS) expects the company to be incorporated at the point of application. A company must be registered with ACRA and must meet the governance and ownership requirements in Appendix 1 of the licensing guidelines. It is not possible for MAS to process a licence application for an entity that does not exist yet. MAS advises applicants to give themselves enough time to complete this step with ACRA especially if internal approvals are required. Having said this Corporate Incorporations are an extremely straightforward process in Singapore. Firms such as Argus Global can incorporate companies within a day on receipt of KYC and other information.
What are some of the questions that will be asked during the application interview for licence application with Monetary Authority of Singapore (MAS) as regulated via the Payment Services Act (PSA)?
MAS will access the key individual’s understanding of the Payment Services Act (PSA) and requirements in relation to their business model. They will also discuss the compliance and audit arrangements. Audit here refers to internal audit.
Apart from the admission requirements, MAS will also ask applicants on how you intend to comply with the ongoing requirements.
Depending on how comprehensive the information provided is, there may be more than one round of interview. Essentially, the more complete your application is, the fewer rounds there will be.
Can the permanent place of business/registered office be finalised only when business commences for Payment Services Licence (PSL) holders?
The Monetary Authority of Singapore (MAS) understands that there are factors such as rental costs etc. involved so this can be finalised after receiving the In-Principle Approval (“IPA”). However, this must be done prior to licence issuance.
As a reminder, permanent place of business/registered office must be an office area where the applicant’s books and records can be securely held. Co-working spaces with hot-desking arrangements do not meet this requirement.
Will there be interest earned on the cash security deposit placed with Monetary Authority of Singapore (MAS) as may be required to be maintained by entities approved under the Payment Services Act (PSA) ?
For security deposits placed with MAS in cash, this will be kept in a bank account and applicants will not earn any interest on that cash deposit. Please see the article below written by our team for more details:
Does the MAS take a similar approach to E-money for Stable coins, or are the policy considerations different?
The MAS is still in the process of conducting a policy review on the classification of stable coins that are not assessed as e-money and will not be able to provide additional information on this issue at this time. Applicants should conduct assessments of their product offering based on the current legislative framework. Applicants may also consider the classification of tokens in other jurisdictions they have done assessments in and can consider adopting similar risk-mitigating measures in their Singapore business. Tokens should be assessed individually as each token has its own unique characteristic which may affect their regulatory classification.
To what extent can a payments services provider outsource its compliance work?
A payment services provider can only outsource the operational portion of the compliance work. Ultimate responsibility and accountability still rests with the key individuals of the PSP.
Is it necessary to complete and provide an Enterprise Wide Risk Assessment (EWRA) or is it sufficient to provide the enterprise risk assessment plan i.e. the questionnaire and the factors to be considered for the License application under the Payment Services Act (PSA)?
It is not sufficient to just provide a plan if the company is already operating. Applicants will be expected to conduct a EWRA and submit it as part of the application. However if you are new to the industry and have yet to commence operations, applicants can use your expected business profile to conduct your EWRA. For example, if you expect a certain profile of customers, expect to provide certain services, expect a certain volume of transactions etc., you should refer to the guidelines and include all of these factors into the EWRA.
This also helps during the application interview as the MAS will ask on the applicant’s AML/CFT risks in relation to the business and it will be difficult to substantiate the answer if a EWRA has not been done.
What are the different licence types Payments Services Act (PSA)?
Under the PSA, payment service providers have to be licensed under one type of licence class namely:
- Money – Changing Licence – Only able to conduct money-changing services.
- Standard Payment Institution Licence – Are able to conduct multiple payment services. Subject to the following thresholds:
- Less than or equal to S$3m monthly transactions for any activity type.
- Less than or equal to S$6m monthly transactions for 2 or more activity types.
- Less than or equal to S$5m of daily outstanding e-money for e-money issuance services.
- Major Payment Institution Licence – Are able to conduct multiple payment services. Subject to the following thresholds:
- Greater than S$3m monthly transactions for any activity type.
- Greater than S$6m monthly transactions for 2 or more activity types.
- Greater than S$5m of daily outstanding e-money for e-money issuance services.
Please see the article below written by our team for more details:
How does one get licenced under Payments Services Act (PSA)?
Payment Services Act (PSA) came into effect in Singapore on 28 January 2020 and it streamlines payment services regulatory framework under a single piece of legislation. It is regulated by the Monetary Authority of Singapore (MAS). It requires the preparation and submission of Form1, Form3 and other supporting documents in an application pack that needs to be submitted to MAS. Please see the article below written by our team specifically on PSA Licencing for more details:
Who can the applicant approach should they need any guidance on the licence application as required by the Payment Services Act (PSA)?
If applicants are unsure of the process, you may engage a professional service provider like Argus Global for assistance. In most cases legal opinion are not required , the exception to this being service providers in the Digital Token space, and professional & experienced firms such as Argus Global can help with the entire process.
Can one still submit a licence application under the Payment Services Act (PSA) if not all the licensing requirements are met at the point of application?
Monetary Authority of Singapore (MAS) has listed down what they expect to see in the application guidelines. Applicants must be committed to fulfilling all the admission criteria prior to licence issuance. Except for some items that are settled in the period between the in-principal approval (IPA) and the licence issuance, or at different points in the application process, such as where a key individual has been identified but the paperwork has yet to be completed, MAS expects all criteria to be met at the point of licence application.
What happens if the key individuals of the company applying for Payment Services Licence (PSL) do not meet the competency requirements?
Competency of key individuals is critical in deciding whether the licence application gets approved. It is almost impossible for the Monetary Authority of Singapore (MAS) to proceed with an application successfully without sight of this.
These key individuals will also need to attend an application interview later on in the process where the MAS will access their understanding of the Payment Services Act (“PSA”) and requirements in relation to the applicant’s business model. Therefore it is important that individuals who are taking on these key roles (CEO, executive director, compliance officer) be identified at the point of application.
The MAS can, however, make an exception if there is already somebody in the company who has the ability to take on that individual’s role in the interim, for example the company has a compliance head but has yet to hire a Singapore compliance officer. The actual arrangements need not be operational at the point of application, but it should be available upon licence issuance and commencement of the business.
Is a penetration test required to be completed prior to Payment Services Licence (PSL) application?
All applicants who provide online financial services will be required to complete a penetration test and remediate all high risk findings prior to licence issuance. Online financial services refer to anything that has the capability to offer a financial service such as execution of payment transactions. The full definition can be found in the MAS’ Technology Risk Management (TRM) guidelines.
Do note that if an applicant plans to do a penetration test prior to licence application, the penetration test must be done within a reasonable period – within a year of licence issuance and there cannot be major system changes or updates since the last test.
This test can also be done after the In-Principle Approval (“IPA”) is granted however, all foreseeable high-risk findings must be mediated prior to licence issuance and commencement of business.
Must base capital requirements be met at the point of application for entities desirous to be regulated under the Payment Services Act (PSA)?
Base capital requirements should be met at the point of licence application. However, if the applicant has legitimate reasons why the entity cannot meet the requirements and have plans to raise capital (e.g. via fund raising), this needs to be elaborated on in the application.
The Monetary Authority of Singapore (MAS) will not grant a licence if the base capital requirements cannot be met. Any plans to raise funds need to be concrete and ideally already in motion. For instance, if the company intends to raise funds, it should ideally have identified investors and have a realistic short-term timeline (within 1-2 months) to complete the fund raising.
Are drafts allowed to be saved for the online application process for the Payment Services Act (PSA) ? And what happens after the forms have been submitted?
The system does not allow drafts to be saved so the form must be completed in one go.
Upon submission of the form, applicants will receive an email from a Monetary Authority of Singapore (MAS) officer to acknowledge receipt of the application. Thereafter, once the submitted application forms and documents have been reviewed, MAS will arrange an application interview with the key personnel.
Please note that there is no deadline or cut-off period for the duration of the entire licensing process. Applicants can check in with the MAS officer assigned to your case on the status of the application from time to time.
In relation to Initial Coin Offering (ICO) issuers, if the issuer is issuing a utility token that could be a DPT, is there a requirement for the ICO issuing company to have a Digital Payment Token (DPT) licence under the Payment Services Act (PSA) ? Or is the licence only applicable to the platform that issues the token but not necessarily the issuer?
Applicants need to do an assessment of each token that you intend to offer to determine whether it is a DPT or even a security. The PSA licence requirements pertain to a person carrying on a business of providing any type of payment service in Singapore, where carrying on a business generally includes activities that have system continuity and repetition. Where the activity is a one-off issuant, this does not constitute continuity and repetition and thus, will not fall under the licensing scope.
How will the newly published Consultation paper on the new Omnibus act for the financial sector affect the Payment Services Licence (PSL) application?
Digital Payment Token (DPT) providers will likely be caught under the PS Act already. The Omnibus Act is trying to capture those who are not already caught under the PS Act. This refers mainly to service providers who are incorporated in Singapore but provide their services wholly outside of Singapore.
What happens to rejected Payment Services Licence (PSL) applications?
In a nutshell, if you have not started operations, you will not be able to start. If you have started operations but not carrying out a regulated activity, you may continue as per usual if you do not require a licence. However, you will not be able to carry out any regulated activities if your application is rejected. For those who are operating under the exemption period, if your application gets rejected, you will have to stop business immediately upon rejection of the application.
Applicants can apply as many times as you want but it is advisable to only do so when you have re-assessed that you are ready to apply again. Trying a second time without improving your business plan or your mitigating controls will not change the end result. Essentially, you do not want too many rejections under your records as it does not reflect well for your entity.