On 21 November 2017, the Monetary Authority of Singapore (MAS) issued a consultation paper on the Proposed Payment Services Bill (Consultation Paper). This follows the consultation paper issued by the MAS on 25 August 2016 regarding the Proposed Activity-based Payments Framework and Establishment of a National Payments Council, which proposed an activity-based regulatory framework to regulate entities operating within the payments ecosystem. Details on the consultation paper of 2016 can be accessed from our client alert here.
The proposed Payment Services Bill follows through on the activity-based approach proposed in the consultation paper of 2016, and seeks to create a new payments legislation to:
i. Streamline payment services under a single legislation by combining the Payment Systems (Oversight) Act (Cap. 222A) (PSOA) and the Money-Changing and Remittance Businesses Act (Cap. 187) (MCRBA); ii. Enhance the scope of regulated activities to take into account developments in payment services; and iii. Calibrate regulations according to the risks the activities posed by adopting a modular regulatory regime.
Proposed Regulatory Framework
The Payment Services Bill will comprise two parallel regulatory frameworks:
i. First, a licensing regime that regulates retail payment activities facing consumers and merchants. Any entity that intends to provide retail payment services in Singapore will need to hold a licence (or be exempted from holding a licence).
ii. Second, a designation regime that regulates payment systems whose disruption would pose financial stability risks or impact confidence in the financial system. Such systems are likely to be inter-bank payment systems such as FAST, GIRO, and MEPS+. The designation regime will be expanded to also allow the MAS to designate payment systems for competition or efficiency reasons.
The licensing regime will regulate the following activities that either (a) face customers or merchants; or (b) process funds or acquire transactions, with a direct payments nexus. Therefore:
i. Service providers that process only data (e.g. payment instructions) and not funds will be treated as outsourcing services. Hence, providers of payment instrument aggregation services and data communications platforms will not require licensing under the Payment Services Bill.
ii. Services provided exclusively to other payment service providers and financial institutions such as banks fall outside the ambit of retail services. However, the payment systems through which these services are provided may be designated for regulation if they pose financial stability risks. Examples of such important payment systems are infrastructure such as FAST and MEPS+.
The scope of activities requiring licensing under the Payment Services Bill is set out below.
Entities that provide payment services which are related and incidental to other businesses which they carry on must also obtain a licence. This is unless the entity has been exempted from holding a licence to conduct that payment activity, or if MAS has specifically excluded the payment activity from the regulatory ambit of the Payment Services Bill.
It is proposed that there will be a single licence structure under the licensing regime, with licensees offering retail payment activities to be grouped into three main licence classes, namely: