Second reading of Payment Services Bill Singapore
The Payment Services Bill (PSB) was read for the second time by Mr. Ong Ye Kung, Minister for Education, on behalf of Mr. Tharman Shanmugaratnam, Deputy Prime Minister and Minister-In-Charge of The Monetary Authority of Singapore on 14 Jan 2019.The Bill is set to combine various types of payment services under the 2006 Payment Systems (Oversight) Act – or PS (O) A – and the 1979 Money-Changing and Remittance Businesses Act – or MCRBA.
Regulatory frameworks for designation and licensing
The Bill comprises two regulatory frameworks: a designation regime and a licensing regime.
- The designation regime enables MAS to designate significant payment systems, where it is widely used in Singapore, or its operations have an impact on the operations of other payment systems in Singapore, to ensure the stability and market efficiency of the financial system.
- The licensing regime enables MAS to regulate a wide range of payment services which is grouped into seven, namely: account issuance, domestic money transfers, cross-border money transfers, merchant acquisition, e-money issuance, digital payment token dealing and exchanges, and money-changing.
Three classes of licenses
Three classes of licenses are provided in the bill, a licensee may be a money-changing licensee, a standard payment institution or a major payment institution.
- Money-changing licensees can provide only money-changing services.
- Standard payment institutions may provide any combination of the seven defined payment services, but it must be below specified transaction flow or e-money float thresholds
- Major payment institutions can go above the specified thresholds.
After the passing of the bill, Singapore will be among the first few financial services regulators in the world to introduce a regulatory framework for digital payment token services.
Mitigating key risks in payment services
The Bill intends to mitigate the four key risks that are common across many payment services,
- loss of customer monies;
- ML/TF risks;
- fragmentation and lack of interoperability across payment solutions;
- technology risks
The Major payment institutions are required to safeguard customer monies from loss through the institutions’ insolvency by
- an undertaking or guarantee by any bank in Singapore or prescribed financial institution to be fully liable to the customer for such monies;
- a deposit in a trust account; or
- safeguarding in such other manner as may be prescribed by MAS.
To ensure interoperability of payment solutions, in the interests of consumers and market development, MAS can now mandate:
- a designated payment system operator or major payment institution to allow third parties to access any payment system it operates, and the access regime imposed must be fair and not discriminatory;
- a major payment institution to participate in a specified common platform or equivalent arrangement to achieve interoperability of payment accounts, and
- a major payment institution to adopt a common standard to make widely-used payment acceptance methods interoperable.
The bill requires payment services providers to ensure there is adequate risk governance and implementation of adequate controls in user authentication, data loss protection and cyber-attack prevention and detection.
Right-sizing permissible activities
The bill attempts to tailor the regulations to the activities of the licensees, such as opening accounts, issuing e-money, transferring money within Singapore and overseas and providing e-payment solutions to consumers and merchants.
- e-money issuers will now not be allowed to on-lend any customer money or use any customer money to materially finance their own business activities.
- withdrawals of Singapore dollars will not be allowed from e-money accounts held by Singapore residents which is in tune with the objective of the bill which is to promote greater adoption of electronic payments, in lieu of cash services
- personal payment accounts will now be subjected to a stock cap and annual flow cap at $5,000 and $30,000 respectively to ensure stability of the financial system, by reducing the risk of significant outflows from banks deposits to non-bank e-money.
The public consultations has been conducted by MAS on the Payment Services Bill and it has been well received within the industry. The feedback received has been taken into account in preparation of the bill. The new rules will be in effect no earlier than 6 months from the time the Bill is passed.
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