The Payment Services Act (PS Act) which came into force in January 2020, aims to create an innovative environment for Financial Technology (FinTech) in Singapore.
The PS Act integrated the previous Payment Systems (Oversight) Act (Chapter 222A), and the Money-Changing and Remittance Businesses Act (Chapter 187), and also covers specific services that were not previously regulated.
The PS Act comprises a designation framework and a licensing framework.
The designation framework empowers the regulator to name specific systems as “designated payment systems” due to their strategic importance. Such payment systems are subject to additional oversight to ensure financial stability and operational efficiency.
The licensing framework establishes three classes of licences according to the scale (and therefore risk) of the payment services provided. They are:
- Money-changing license
- Standard payment institution licence
- Major payment institution licence
There are detailed definitions of scale for each class of license that we won’t go in depth here, but if the total value of payment transactions for one payment service exceeds a monthly average of S$3 million over a calendar year, the service provider would be required to apply for a major payment institution license. There are other specific thresholds for licensees that carry on the businesses of e-money account issuance and e-money issuance services. A company holding a major payment institution licence will be regulated more comprehensively.
Activity types that need a payment license
The PS Act identifies the following as payment services:
Account issuance services: These include electronic wallets (what used to be called a stored value facility) or a non-bank issued credit card.
Domestic money transfer services: These are services of accepting money for executing payment transactions in Singapore between parties that are both not financial institutions.
Cross‑border money transfer services: This covers those services previously regulated under the Money-changing and Remittance Businesses Act which related to the sending of money from Singapore to overseas accounts or receipt of money from overseas.
Merchant acquisition services: When a provider acts for a merchant (retailer) in accepting or processing payments by a consumer, including providing point of sale terminals.
E-money issuance services: These are services relating to the issuing of electronically-stored monetary value for the purposes of payment transactions.
Digital payment token services: Businesses that buy and sell digital payment tokens (this can include cryptocurrencies), and platforms which enable the transactions of these digital payment tokens in Singapore. The PS Act has also been amended to include other activities relating to digital payment tokens, including custody of, and facilitation or transmission of, digital payment tokens.
Money‑changing service: Money changers of all kinds would fall under this category.
Services that are excluded from the regulation regime include prepaid cards, loyalty programmes, in-game virtual currency, non-monetary consumer loyalty points, and payment services conducted by licensed or exempt entities regulated under the Securities and Futures Act and the Financial Advisers Act.
If you want to provide regulated payment services
Yuen Law can guide you through the license application process. While the qualifying criteria are generally clear, the regulator assesses each applicant on a case-by-case basis. The Monetary Authority of Singapore takes a meticulous and calibrated approach in reviewing and approving applications, and applicants should not expect applications to be simply a matter of ticking items in a checklist. Among the factors that Yuen Law will assist you in considering are the criteria of the proposed directors and professionals, and the nature of the business model as set out in your business plan.
If you are currently providing payment services
If you are already providing the payment services regulated under the PS Act, you may be doing so under a licence that had been “grand-fathered” from the Acts that the PS Act replaced, under an exemption, or a licence under the PS Act. If the scope of your business has expanded or otherwise changed, or you have issues about compliance with the regulatory requirements that have not been addressed, we can advise you on how you can re-align your business activities with the compliance requirements.
Yuen Law provides up-to-date, incise advice on matters regarding digital payment services licensing in Singapore. Contact us to make an appointment.