The Payment Services Act took effect in Singapore on January 14, 2019. It is intended to regulate and license Singapore's providers of payment services. It also protects people living in Singapore from the negative effects of fraud, money laundering, and other financial crimes.
In November 2017, the Parliament of Singapore received a Consultation Paper that advocated the introduction of the Payment Services Act. Before this Consultation Paper was issued to Parliament, the Monetary Authority of Singapore (MAS) had been operating according to the Payment Systems (Oversight) Act (PSOA) and the Money-Changing and Remittance Business Act (MCRBA). These acts had to be replaced because over time, it had been shown that they had failed to regulate and license payment service providers effectively. These acts also failed to curtail several instances of fraud against consumers.
It took Parliament more than one year to approve the Payment Services Act and make it a law of the country. From the time when it was issued to Parliament in November 2017 to January 14, 2019, when it finally passed into law, the bill was reviewed twice; once in November 2018 and again on the day it was passed into law.
Definition of the Payment Services Act
The Payment Services Act is a better framework put in place by the Singaporean government to oversee the licensing and regulation of payment systems. The main aim of putting this system in place is to protect the interests of consumers as well as have a better handle on regulating the actions of payment service providers. Under the Payment Services Act, all payment services would go through the same legislative system. The Payment Services Act is thus expected to reduce and counter money laundering.
The Payment Services Act works on the foundation of two frameworks. The first framework is related to licensing and the second is a regulatory framework for payment systems.
The Payment Services Act serves as a guide for all financial services in Singapore. It is one of the country’s primary defenses against money laundering. It also protects the rights of Singaporean citizens by shielding them from monetary scams.
Services Related to the Payment Services Act
The Payment Services Act covers the following payment services:
Domestic Money Transfer Services – These payment services provide money transfer services that exist within the boundaries of the country. They are mostly small money transfer shops scattered across the country.
Money Changing Services – These services make provisions for Singaporeans to trade in foreign currencies. These services usually involve money changers who trade in the exchange of foreign currency notes for physical cash.
E-Money Issuance Services – Such services include any payment service that is involved with the giving of e-money to people within Singapore. The e-money is used to conduct cashless transactions and stays in the owner’s e-wallet.
Money Changing Services– These services make provisions for Singaporeans to trade in foreign currencies. These services usually involve money changers who trade in the exchange of foreign currency notes for physical cash.
Digital Payment Token Services– Such services cover the trading of digital payment tokens. They cater to businesses that create a platform for the buying and selling of digital payment tokens to take place.
Account Issuance Services – These services are services that offer a payment account in the form of credit cards that are not owned by banks. They include any service that offers a payment account used to manage the payment of bills.
Cross–Border Money Transfer Services – These services make provision for the movement of money into or away from Singapore.
However, not all payment services are governed by the Payment Services Act. Some other payment services are unrelated to the Payment Services Act. These services include the following:
Virtual Currencies Used for a Limited Time – These virtual currencies do not refer to cryptocurrencies but instead to currencies that are used only within a particular system such as a game.
E-Money Retained for a Specific Purpose – This money does not fall under the scope of the Payment Services Act because it is already kept aside for a limited purpose. An example of this is a prepaid card.
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Payment Service Act Obligations
Those who own a business which offers any of the services that are governed by the Payment Services Act need to apply for one or more of a list of certain licenses.
Three licenses are available for businesses affected by the Payment Services Act.
Money Changing License
All businesses that supply with money changing services must apply for this license to be able to keep offering these services. However, this license is limiting as it allows those who hold it to carry out money changing services, but nothing else. One can bypass this license if you already a Standard Payment Institution License or Major Payment Institution License is already owned.
Standard Payment Institution License
This license is for companies that conduct payment services within certain limits. The limits are for payment transactions up to a certain amount within a month or in one financial calendar year.
A Payment transaction that is as high as S$3 million for a single payment service
A Payment transaction that is up to S$6 million for more than two payments.
These limits, however, do not apply to businesses that offer e-money account issuance services.
Major Payment Institution License
Not all businesses are eligible for the Major Payment Institution License. To be eligible for this license, a business must fulfill certain criteria. The business in question must have a permanent physical place of business in Singapore. It is also to have an executive director who is a citizen of Singapore. The business must also be a registered company; it may have either been registered in Singapore or abroad.
The Monetary Authority of Singapore has specified its requirements for one to receive all three licenses. These are as follows:
The applicant must follow the Guidelines on Fit and Proper Criteria
The financial state of the person must be positive
The granting of the license would be of an advantage to the public
Businesses of all sorts require certain licenses. Sometimes, it may be difficult or time-consuming for a business owner to obtain such licenses. We at Paul Hype Page & Co are able to address such matters if you need any assistance. We will provide our best aid and advice in the process of application for any of the business licenses you may need. In this way, you can pivot your attention to the operations of your business much sooner.
For the regulatory aspects of the obligations, MAS requires prompt notification with regard to the following: pending cases against the payment service provider either in Singapore or any other country, action taken against the company regarding violations of any laws of Singapore or any other country; major changes made to the regulatory requirements of any other body other than MAS including changes made by bodies outside of Singapore, occurrences that negatively affect the service provider’s ability to carry out operations, submission of reports on the business of the service provider, and payment of money for regulatory services provided.
MAS closely regulates the activities of all payment service providers. It serves as the body that regulates all payment service providers in Singapore.
All designated payment systems that violate the Payment Services Act would face indictment under the law and might either have their businesses shut down or face significant fines.
Payment Services Act FAQs
How is the Payment Services Act related to fintech in Singapore?Tiwi2020-07-03T11:33:57+08:00
The Payment Services Act affects the activities of all fintech companies in Singapore. Fintechcompanies rely heavily on the banking sector of Singapore.Therefore,the Payment Services Act provides a way for them to transact traditionally. This will create more growth amongfintechbusinesses, especially those that specialize in blockchain and cryptocurrencies.
Is the Payment Services Act expected to be modified or repealed?Tiwi2020-07-03T11:33:39+08:00
The Payment ServicesAct, as is true of most other laws, is likely to be modified at some point in the future. Through public consultation and the observations made by MAS, the Payment ServicesAct mightadd new specification or cancelothers. However, at the moment, there has not been much discussion about the immediate modification or repeal of the Payment Services Act.
Are Laws similar to the Payment Services Act found in countries other than Singapore?Tiwi2020-07-03T11:33:21+08:00
Almost every country has laws that are very similar to the Payment Services Act of Singapore. In fact, some countries refer to such laws by the same or a similar name. For example,in Japan, the related act which exists there is knownas the Payment Service Act. These laws are enacted to protect the citizens as well as introduce away to regulate the activities of payment service providers.