Payment & Settlement Systems in Singapore

MAS' role in the oversight of payment and settlement systems is to promote the safety and efficiency of these infrastructures.  In this regard, MAS is empowered under the Payment System (Oversight) Act 2006 to supervise payment system operators such as the Automated Clearing House ("ACH") and payment system participants.

1. Clearing and Settlement Systems

1a. New MAS Electronic Payment System (MEPS+)

MEPS+ is MAS’ second generation real-time gross and government securities settlement system that replaced the prior MEPS in 2006.  MEPS first began operation in 1998.  The main feature of MEPS+ is the real-time and irrevocable transfer of funds and scripless Singapore Government Securities (SGS) between MEPS+ participants, subject to the availability of funds and/or securities.  The new system also provides several improved features over the MEPS system. These include:

      • Use of SWIFT message formats and network
      • Advanced queue management capabilities
      • Automated collateralised intra-day liquidity facilities
      • Automated gridlock resolution

All banks in Singapore are eligible to participate directly in MEPS+.  Regulated non-banks of systemic importance may also seek approval from MAS to participate in MEPS+.  MEPS+ is a designated payment system under the Payment Systems (Oversight) Act 2006.

For more details on MEPS+, please follow this link here.

1b. Continuous Linked Settlement (CLS) System

CLS is a global multi-currency settlement system that aims to eliminate foreign exchange (FX) settlement risk due to time-zone differences.  The CLS settlement service, provided by CLS Bank, allows both legs of a FX trade submitted by members to be settled simultaneously across the books of CLS Bank and therefore guarantees finality and irrevocability of the settlements.

CLS went live in September 2002 and initially settled FX transactions in seven major currencies - the Australian Dollar, Canadian Dollar, Euro, Japanese Yen, Pound Sterling, Swiss Franc and US Dollar.  The Singapore Dollar (SGD) was included in CLS in September 2003, together with the Danish Krone, Norwegian Krone and Swedish Krona.  As a result, FX trades involving SGD and other CLS currencies can be settled in CLS without exposure to FX settlement risks.
 
Three local banks - DBS Bank Ltd, Oversea-Chinese Banking Corporation Ltd and United Overseas Bank Ltd, who are CLS shareholders - started settling their eligible FX trades through CLS Bank in December 2002.  For efficiency, the three banks have established Clearing & Payment Services Pte Ltd (CAPS), a common clearing utility, to process their CLS transactions.

CLS is regulated and supervised by the Federal Reserve in the U.S. as an Edge corporation.  The U.S. Federal Reserve also chairs the CLS Oversight Committee (“OC”), in which MAS participates along with other central banks.  The CLS OC provides a mechanism for central banks whose currencies are settled in CLS to carry out their individual oversight responsibilities.  The U.S. Federal Reserve organizes and administers the CLS OC, which operates in accordance with the Protocol for Cooperative Oversight of CLS (“Protocol”).  The Protocol was adopted by the CLS OC to avoid duplication of effort by the central banks, foster consistent, transparent communications between the central banks and CLS, and enhance transparency among the participating central banks regarding the development and implication of international and domestic policies applicable to CLS.
 
For more information on the Protocol, please follow this link:here.

CLS is a designated payment system under the Payment and Settlement Systems (Finality and Netting) Act.

1c. Singapore Automated Clearing House (SACH)

The Singapore Clearing House Association (SCHA), formed in December 1980, is an association to establish, manage and administer clearing services and facilities for cheques as well as debit and credit items of its members.  It comprises MAS and the commercial banks in Singapore that wish to become members.  As of 31 Dec 2010, the SCHA has 46 ordinary members and 51 associate members. The SCHA establishes the rules on the rights and responsibilities of participating banks, and provides SGD Cheque Clearing, USD Cheque Clearing and Interbank GIRO Clearing services, through the Automated Clearing House (ACH), which is operated by Banking Computer Services Pte Ltd (BCS) since 1981.

Section 59 of the Banking Act allows MAS, in conjunction with the banks and other financial institutions, to establish a Clearing House to facilitate the clearing of cheques and other credit instruments, and regulate its operation. The following subsidiary legislation pertains to clearing house operations:

     • Payment Systems (Oversight) (Singapore dollar cheque clearing and inter-bank Giro) Regulations 20062.

2. Payment Media

2a. Cheques

In July 2003, banks in Singapore migrated to a new cheque clearing system, known as the Cheque Truncation System (CTS).  CTS originated as an initiative from the SCHA and the Association of Banks in Singapore (ABS) to enhance the operational efficiencies of the banking industry.  CTS is the world's first nation-wide end-to-end cheque truncation system, leveraging on advanced imaging and internet technologies to capture cheque images at the point of deposit and transmitting the images over a secured communication network.  Please refer to the ABS website for more information on CTS.

In September 2002, MAS had amended the Bills of Exchange Act and issued the Bills of Exchange (Cheque Truncation) Regulations 2002 to facilitate the establishment of CTS.

Both Singapore dollar (SGD) denominated cheques and United States dollar (USD) denominated cheques presented to, and drawn on banks in Singapore, are cleared through CTS.  Note that for USD cheques to be cleared in ACH, both Presenting and Paying banks must be participants of ACH.  In 2010, the ACH processed 77.4 million SGD-denominated cheques and 1 million USD-denominated cheques, with total values of S$604.3 billion and US$43 billion respectively.
 
The SGD cheque clearing system and USD cheque clearing system are designated payment systems under the Payment Systems (Oversight) Act 2006.

2b. Interbank GIRO

Interbank GIRO (IBG) system allows customers of a participating bank to transfer funds through direct debits and credits, to the accounts of other participating banks.  Previously, it involves the exchange of magnetic media containing payment instructions from the participating banks via ACH.
 
In July 2001, the SACH enhanced the IBG system to a browser-based eGIRO system, thus eliminating the manual delivery of magnetic tapes between participating banks and the ACH.  Participants can now send and receive GIRO items, including returned and rejected items, electronically via a secured communication network.  With eGIRO, clearing cycles for the direct credit and debit transactions are shortened significantly.  In 2010 the number of eGIRO transactions processed was 91.8 million, and the value processed was S$247 billion.

The Interbank GIRO is a designated payment system under the Payment Systems (Oversight) Act 2006.

2c. Credit and Charge Cards

A credit or charge card represents a granted line of credit that allows the holder to make purchases or obtain a cash advance up to an approved credit limit.  For credit cards, the debt incurred can be settled in part; interest is charged on the amount of extended credit.  For charge cards, the full amount of the debt must be settled by the end of each billing period.

For statistics on credit and charge cards, please refer to the monthly statistical bulletin database.

2d. Debit cards

A debit card allows cardholders to make payments and cash withdrawals from their deposit accounts through an Automatic Teller Machine (ATM) or an Electronic Funds Transfers at Point of Sale terminal (EFTPOS).  Debit cards can be broadly categorised into two groups: PIN-based debit cards and signature-based debit cards.  NETS EFTPOS is an example of a PIN-based debit card while VISA Electron and MasterCard Debit are examples of signature-based debit cards in Singapore.  As at 31 December 2010, there were about 99,000 terminals in Singapore.   There were a total of 203 million debit card transactions worth $24.6 billion in 2010.

2e. Stored Value Facilities (SVFs)

Overview and Regulations

A Stored Value Facility (SVF) is a form of prepaid electronic cash or card that can be used within the system of the SVF issuer.  The SVF issuer is known as the holder of the stored value.  Some electronic SVFs are also known as e-money.  Usage of SVFs usually does not require Personal Identification Numbers (PINs) or signatures.  The PS(O)A and its related regulations governs the issuance and management of SVFs.  Please access these regulations here.

An SVF may be a single purpose scheme or a multi-purpose one.  A single purpose SVF is an SVF that is, or is intended to be, used for payment only of goods or services, or of both goods and services, provided by the holder of that stored value facility.  Note that single purpose SVFs are exempt from certain sections of the PS(O)A.  Please see the exemptions here.
 
When the stored value outstanding in the SVF scheme exceeds a prescribed threshold limit set in the PS(O)A, the SVF is regarded as a widely accepted SVF (WA SVFs).  Currently the threshold limit stands at $30 million.  The approval of MAS is required for the continued operation of this type of SVF scheme.  The PS(O)A defines WA SVFs as a stored value facility –

(a)        in which the stored value is held by an approved holder; and
(b)        in respect of which an approved bank has undertaken to be fully liable for the stored value.

In the event that an SVF allows users to store more than S$1,000 in stored value, the holder is also required to comply with the PSOA-N02: Notice to Holders of Stored Value Facilities on Prevention of Money Laundering and Countering the Financing of Terrorism.  This notice, issued in November 2007, requires holders to implement “know-your-customer” measures to establish and verify the identity of users.  The notice may be found here.

Approved WA SVFs

As of October 2011, only three WA SVFs have been approved by MAS.  They are the "NETS CashCard", introduced by Network for Electronic Transfers (Singapore) Pte Ltd (NETS) in November 1996, the "ez-link Card" introduced by EZ-Link Pte Ltd in April 2002, and the “NETS FlashPay”, introduced by NETS in October 2009.

The NETS CashCard is based on smart card technology, and is used primarily for payment of electronic road pricing and parking fees.  The ez-link Card and NETS FlashPay are based on the locally developed Specification for Contactless e-Purse Application (CEPAS) smart card standard, and are used both in the public transport system and at numerous retail points of sale.

Please refer to the following link for the updated List of Approved Widely Accepted Stored Value Facilities – current as of 6 May 2010.

Users, Operators and Issuers of SVF

For users or consumers of SVFs, a Money Sense article is available that provides an overview of SVFs.  Please see “Introduction to Stored Value Facilities: Making sense of stored value facilities used to pay for goods or services rendered”.

Operators of SVFs and holders of stored value may wish to refer to MAS’ ‘Guidelines on Stored Value Facilities’.  These guidelines promulgate best practices that that SVF holders are encouraged to adopt for their schemes.
 

3. Publications and Papers

3a. Bank for International Settlements (“BIS”) Publications

Committee on Payment and Settlement Systems ("CPSS")

MAS is a member of the BIS CPSS, which serves as a forum for central banks to monitor and analyse developments in domestic, cross-border, and multicurrency payment, settlement and clearing systems.  The CPSS contributes to the strengthening the financial market infrastructure by promoting sound and efficient payment and settlement systems.  It has undertaken several initiatives through working groups and specific studies in the field of payment and settlement systems.
 
CPSS publishes reference works on payment systems in the G10 countries as well as various other countries periodically.  The objective of these reference works, widely known as Red Books, is to contribute to the better public understanding and awareness of the way payment systems work in different countries.  MAS participates in several CPSS publications relating to payment systems.  Some of these include:

3b. Executive meeting of East Asia-Pacific Central Banks (“EMEAP”) Publications

Established in 1991, EMEAP is a co-operative organisation of central banks and monetary authorities in the East Asia and Pacific region. The primary objective of EMEAP is to strengthen the co-operative relationships among its members.  MAS is an active member of the EMEAP Working Group on Payment and Settlement Systems.
 
The "Payment Systems in the EMEAP Economies" or EMEAP Red Book was released on 17 Jul 2002.  The Singapore Chapter of the EMEAP Red Book is also separately available.  The EMEAP Red Book is an accomplishment of collective study over the past years by the EMEAP Working Group on Payment and Settlement Systems and promotes further understanding of payment and settlement systems in the EMEAP region.

In addition, the Working Group has published a report, Foreign Exchange Settlement Risk in the East Asia-Pacific Region (December 2001)to analyse the scale of foreign exchange settlement risk in the EMEAP region, based on each EMEAP member's foreign exchange settlement risks survey results.

4. Legislation

The three main legislations covering payment and settlement systems are:

a) Payment Systems (Oversight) Act 2006,

b) Payment and Settlement Systems (Finality and Netting) Act 2002, and

c) Bills of Exchange (Cheque Truncation) Regulations 2002.

To access the primary legislation and any subsidiary legislation such as Regulations, please follow this link.