Published Date: 19 November 2018

Explanatory Brief on the Payment Services Bill

1     The Minister for Education, Mr Ong Ye Kung, on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister-in-charge of the Monetary Authority of Singapore (“MAS”) today moved the Payment Services Bill (the “Bill”) for First Reading in Parliament. 


2     The MAS currently regulates various types of payment services under the Payment Systems (Oversight) Act (Cap. 222A) (“PS(O)A”) and the Money-Changing and Remittance Businesses Act (Cap. 187) (“MCRBA”), enacted in 2006 and 1979 respectively.   However, the payment services landscape has changed considerably in the past few years, beyond the scope of activities and type of risks regulated under the PS(O)A and MCRBA. New payment business models have also blurred the lines between activities regulated under these two Acts.

3     The Bill will streamline payment services under a single legislation by combining the PS(O)A and the MCRBA. To take into account new developments in payment services and the various risks they pose, the Bill will expand the scope of regulated payment services. 

4     The Bill will empower MAS to regulate payment services for the following key risks and concerns:
(a) money-laundering and terrorism financing (“ML/TF”);
(b) loss of funds owed to consumers or merchants due to insolvency;
(c) fragmentation and limitations to interoperability; and
(d) technology and cyber risks.

The requirements to mitigate these key risks or concerns will be imposed only where the licensee conducts the activity that poses the risk identified.

5     MAS conducted a public consultation on the Bill in November 2017. Respondents were generally supportive of MAS’ proposals on the regulatory framework, and MAS has incorporated the feedback into the Bill where appropriate.


6    The Bill comprises two parallel regulatory frameworks.

Designation Framework for Significant Payment Systems

7     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 reasonsThe PS(O)A currently allows MAS to designate significant payment systems for financial stability reasons. as well as for efficiency reasons. 

Licensing Framework for Payment Service Providers

8     The second framework is a licensing regime that will enable MAS to regulate the provision of payment services.The payment services regulated under the Bill are: a) account issuance service; b) domestic money transfer service; c) cross border money transfer service; d) merchant acquisition services; e) e-money issuance service; f) digital payment token service; g) money-changing service. The Bill will regulate seven payment services. Providers of such payment services will be required to hold a licence under the Bill in respect of the type of payment service that is provided. This activity-based licensing framework provides a modular approach to ensure that regulations are appropriately calibrated according to the risks that specific payment services pose for different business models, and this facilitates innovation.

9     To apply risk appropriate regulations to the specific regulated activities that the licensee conducts, there will be three classes of licences under the Bill. At any point in time, the payment service provider need only hold one licence but of a class of licence that corresponds to the risk posed by the scale of payment services provided. A payment service provider may apply to be a money-changing licensee, standard payment institution or a major payment institution. Money-changing licensees can conduct only money-changing services. Standard payment institutions may conduct any combination of regulated activities that are below specified thresholds. Both will be regulated primarily for ML/TF risks. Only major payment institutions may carry out payment services above specified thresholdsThese thresholds are: a. Accepting, processing, or executing a monthly average of payment transactions above $3 million in a calendar year for any activity (other than an account issuance service where each payment account stores e-money), or above $6 million for two or more activities activity (other than an account issuance service where each payment account stores e-money); or b. Holding an average daily e-money float above $5 million in a calendar year., and will be regulated more comprehensively.

10     An applicant for a payment services licence (except for a money-changing licence) will have to fulfil the following criteria:
(a) the applicant must be a company (incorporated in Singapore or overseas);
(b) the applicant must have a permanent place of business in Singapore or a registered office in Singapore; and
(c) the applicant must have at least one executive director who is a Singapore citizen or Singapore Permanent Resident, or a person belonging to a class of persons prescribed by MAS.

11     The payment services regulated under the Bill are those provided in Singapore. In addition, MAS will prohibit the solicitation in Singapore in respect of any type of payment services from a person who is not a licensee.

12     To differentiate payment services licensees from deposit-taking institutions, the Bill will:
(a)  prohibit licensees carrying on a business of providing an e-money issuance service from lending any customer money, or using any customer money, or any interest earned on any customer money, to finance wholly or to any material extent any activity of any business carried on by the licensee; and
(b) prohibit licensees from offering cash withdrawals in Singapore dollars, from payment accounts storing e-money that are held by Singapore residents.The ability to offer cash withdrawals is a distinguishing feature of a banking business, and a privilege reserved for local banks and Qualifying Full Banks under free trade agreements.

Key Risk Mitigating Provisions 

13     For the protection of consumers and merchants, major payment institutions must safeguard customer monies from its insolvency through any of the following means: 
(a) an undertaking by any bank in Singapore or prescribed financial institution to be fully liable to the customer for such moneys; 
(b) a guarantee by any bank in Singapore or prescribed financial institution;
(c) a deposit in a trust account in such manner as may be prescribed by MAS; or
(d) safeguarding in such other manner as may be prescribed by MAS.

14     To reduce fragmentation of widely-used payment solutions, MAS will have interoperability powers in the Bill which it may exercise where necessary.  The Bill will provide MAS with the powersThe powers extend to certain exempt entities under the Bill as well. to:
(a) mandate that a designated payment system operator or major payment institution allows third parties to access any payment system it operates, and the access regime imposed must be fair and not discriminatory;
(b) mandate any major payment institution’s participation in a common platform to achieve interoperability of payment accounts including wallets with pervasive customer reach; and
(c) mandate that any major payment institution adopt a common standard to make widely used payment acceptance methods interoperable.

15     The Bill will give MAS powers to impose technology risk and cyber security risk management requirements on all licensees. Licensees that provide payment services which carry ML/TF risks will also need to comply with ML/TF risk mitigating measures that MAS will impose under the MAS Act.

General Powers and Transitional Arrangements

16     To ensure that the objects of the Bill are met, MAS will have general powers over all regulated entities, including powers to conduct inspections and investigations, and emergency powers. The Bill will require regulated entities to comply with general requirements relating to corporate governance, capital adequacy and business conduct.

17     As the PS(O)A and the MCRBA will be repealed at the commencement of the Bill and new payment services will be introduced, the Bill provides transitional arrangements for existing regulated entities as well as powers to make transitional arrangements for entities currently providing the new payment services but are not regulated. Transitional arrangements of between six and 12 months will be provided to facilitate a smooth transition of these entities into the new regulatory framework, and allow entities sufficient lead time to comply with new requirements.