How to Offer E-Wallet Services in Singapore: Licensing Guide
It is no exaggeration to say that the digital age has modernised and dramatically changed the way business owners and customers interact with each other. About 30 years ago, you may have been hard-pressed to find more than a few businesses willing to offer customers alternative modes of payments, or even be capable of accepting payment through credit cards.
Fast forward to today, where there is no shortage of ways through which businesses can receive payments from customers. On top of the normal gamut of credit or debit cards, you may have noticed that many businesses have also started accepting payment through e-wallet services in Singapore.
The rise in popularity of e-wallet services, such as GrabPay and DBS PayLah!, have turned the heads of many entrepreneurial businessmen in Singapore – can they cash in on this new trend and start their own e-wallet service? If so, what are the legal considerations they must keep in mind before going down this path?
This article aims to inform business owners who are planning to offer e-wallet services in Singapore:
Before we proceed, it may be helpful to clarify the relationship and roles of the different relevant parties utilising an e-wallet service:
- A customer (or a user) can be any individual or entity that uses the e-wallet service to make a payment for a particular transaction;
- A business is the entity that uses the e-wallet service to receive the payment from customers; and
- The e-wallet service provider is the intermediary that connects the business with the customer by providing the software that allows the customer to digitally transfer monies to the business.
What is an E-Wallet Service?
As the name suggests, the digital wallet is like a computerised form of your wallet – it is a software-based system that:
- Securely stores your information (such as your credit card information) pertaining to your modes of payment; and
- Allows you to make transactions and store funds within that system.
Why Should I Launch an E-Wallet Service in Singapore?
There are many compelling reasons why you may be tempted to launch your own e-wallet service in Singapore:
- Smartphones are ubiquitous in Singapore, and this means it is likely that more people would have the means to access e-wallet services to make digital payments to businesses. In 2021, it was estimated that about 88% of residents in Singapore use a smartphone – in other words, about 5 million people may have the opportunity to use e-wallet services in Singapore alone, which is a pretty big market to tap into.
- Furthermore, the demographics of users utilising such e-wallet services are ever changing. Gone are the days where only the youthful generation may be open to consider using modern technological tools such as an e-wallet service. In its push to transform Singapore into a digital society, the Singapore government has strongly encouraged various businesses to utilise e-wallet services, ranging from the young business entrepreneurs operating online to your local silver-haired neighbourhood hawker.
- Launching an e-wallet service is also a good way to make money, since the business model of an e-wallet service can potentially provide the e-wallet service provider with multiple streams of revenue, such as:
- Charging businesses a platform fee to utilise the e-wallet service.
- Offering advertising space on its e-wallet apps or website.
- Earning interest on the income that customers store in their e-wallets.
How to Offer E-Wallet Services in Singapore
E-wallet services in Singapore are regulated by legislation. Under the Payment Services Act, any person who wishes to carry on a business of providing payment services (such as an e-wallet service) is required to have a licence.
The following are 7 types of payment services that you can provide in Singapore. The first 4 are applicable if you wish to provide an e-wallet service. These 4 payment services essentially allow customers to retain monies in their e-wallet and make the appropriate transfers whenever they are engaging in a transaction (either from customer to business or from customer to customer):
- An account issuance service – involves issuing a payment account or any service relating to any operation required for operating a payment account, such as an e-wallet (including certain multi-purpose stored value cards). This includes an e-money account issuance service, which is an account issuance service whereby the payment accounts issued can store e-money.
- A domestic money transfer service – this is the provision of service that allows you to provide a local fund transfer service (such as transferring payment from one e-wallet holder to another) in Singapore. This includes payment gateway services and payment kiosk services.
- A merchant acquisition service – as the service provider, you would be able to process payment transactions and payment receipts for and on behalf of a business. This usually entails providing a point of sale terminal or an online payment gateway.
- E-money issuance service – the service that allows you to issue e-money for customers to pay the business or transfer money to another individual.
- A cross-border money transfer service – the service that allows you to remit money into or outside of Singapore.
- A digital payment token service – the service of buying or selling digital payment tokens (DPTs) (commonly known as cryptocurrencies) or providing a platform to allow persons to exchange DPTs.
- A money-changing service – providing the service of buying or selling foreign currency notes.
Payment service provider licences
These are the types of licence you can choose to apply for:
- A money-changing licence.
- A standard payment institution licence; or
- A major payment institution licence.
A money-changing licence is required if you wish to conduct money-changing services. You will not need such a licence if you do not intend to provide money-changing services, such as because you will be operating your payment services only domestically.
However, consider obtaining a money-changing licence if you will eventually operate in the international market. This is since there are e-wallet service providers that allow customers to convert the monies stored in e-wallets into a foreign currency to pay for their overseas transactions. Do note that if you wish to have a money-changing licence, you should have at least one year’s business experience.
On the other hand, both a standard payment institution licence and the major payment institution licence allow you to provide all the payment services listed above (except for a money changing service, for which you need the money-changing licence).
The standard payment institution licence differs from the major payment institution licence in that under the former, there is a threshold limit as to the total value of transactions that can be accepted, processed or executed in a month. The threshold limits for performing any payment service (other than e-money account issuance and money-changing service) when holding a standard payment institution licence are set out below:
- S$3 million in monthly transactions for any payment service per month;
- S$6 million in monthly transactions for two or more payment services per month; and
- S$5 million in total issued e-money on any particular day (for the e-money issuance service).
Alternatively, if you will be performing an e-money account issuance service, then the threshold limit when holding a standard payment institution licence is S$5 million in stored e-money in all payment accounts issued to Singapore residents on any particular day.
Thus, if you are of the view that your e-wallet services would exceed the above total threshold limits, you should obtain a major payment institution licence instead.
Also do take note that you will need to meet certain eligibility criteria when applying for either a standard payment institution licence or a major payment institution licence:
- The applicant of the licence must be a Singapore-incorporated company, or a foreign corporation registered in Singapore.
- The applicant must have a permanent place of business or registered office.
- The applicant must have a minimum base capital of S$100,000 (S$250,000 if you are applying for a major payment institution licence).
- The applicant’s board of directors should have either:
- At least 1 executive director who is a Singapore Citizen or a Singapore Permanent Resident.
- At least 1 non-executive director who is a Singapore Citizen or Singapore Permanent Resident and at least 1 executive director who is a Singapore Employment Pass holder.
Additionally, there may be certain special licensing requirements that you may need to be mindful of when making the application.
For example, any major payment institution licence holder is required under the law to maintain a security of either $100,000 or $200,000 to fulfil their obligation to protect the value of the money that customers have stored in the e-wallet service.
Another example that you should know is that customers are not allowed to hold more than S$5,000 a day in their e-wallets nor would they be allowed to transact more than S$30,000 in a 12-month period. Therefore, as an e-wallet service provider, you would be required to put in place measures to prevent customers from holding too much monies in their e-wallet.
You can find out more about applying for a payment service provider licence here.
Exemption from holding payment service provider licences
Under the current laws, certain entities are exempt from being required to hold a licence to operate as a payment service provider. These entities include banks and credit card issuers.
Prior to making your application, you should determine whether you meet the eligibility criteria for applying for the particular type of licence. You should also read the Guidelines on Licensing for Payment Service Provider provided by the Monetary Authority of Singapore (MAS) (found here), which sets out a list of items that MAS considers when assessing your application.
For example, MAS considers various factors such as:
- Whether your business has proper governance and ownership requirements.
- Whether there are sufficient compliance arrangements in place to ensure regulatory compliance.
- Whether the key individuals in charge of providing service as a payment service provider have sufficient experience in operating a business in the payment service industry, or related areas in the financial services industry.
- Whether the applicant has a permanent place of business or registered business in Singapore.
You should note that the factors listed above are not exhaustive. It is open for MAS to impose additional conditions to address any unique risks posed by the applicant on a case-by-case basis.
You will be required to fill in and submit an online form with a Corpass ID. The application fees are as follows:
- For a money-changing licence – S$500.
- For a standard payment institution licence – S$1,000 or the sum of the fees below for the payment services applied for, whichever is higher.
- For a major payment institution licence – S$1,500 or the sum of the amounts below for the payment services applied for, whichever is higher.
|Activity type||Application fee for standard payment institution licence||Application fee for major payment institution licence|
|Account issuance service||S$0||S$1,500|
|Domestic money transfer service||S$1,000||S$1,500|
|Merchant acquisition service||S$1,000||S$1,500|
|E-money issuance service||S$1,000||S$1,500|
|Cross-border money transfer service||S$1,000||S$1,500|
|Digital payment token service||S$1,000||S$1,500|
Once you have obtained the licence, you will be required to pay an annual licence fee. The applicable annual fees depend on the payment services that your licence permits you to conduct. In sum, the annual licence fee would either be S$5,000 or the sum of amounts below for the payment services provided, whichever is higher.
|Account issuance service||S$0|
|Domestic money transfer service||S$5,000|
|Cross-border money transfer service||S$5,000|
|Merchant acquisition service||S$5,000|
|E-money issuance service||S$5,000|
|Digital token payment service||S$5,000|
If all the above rules and regulations sound overwhelming, or if you think that you need a bit more time to tinker with your service model before rolling it out full scale, you need not worry.
The Singapore government recognises that a heavily regulated financial industry may prove to be a barrier to entry for innovative startups, and have therefore set up an MAS Financial Technology (“Fintech”) Regulatory Sandbox. In the MAS Sandbox, you can test your e-wallet service in a well-defined space (just much like a sandbox) and duration, whereby certain legal and regulatory requirements will be relaxed.
During the trial period, you may find out that there are certain interface issues that may arise when a customer attempts to make payment to a business, and this may be a good opportunity for you to fine-tune your product before officially launching it.
You can find out more about making an MAS Sandbox application here.
Ongoing Obligations After Being Licensed to Offer E-Wallet Services in Singapore
Your job does not end once you have successfully obtained a licence to provide e-wallet services in Singapore. As you would imagine, the purpose of the Payment Services Act is to ensure that customers using the e-wallet services are not left hung out to dry should the e-wallet service provider fail.
Businesses providing such e-wallet services need to ensure that they have adequate control mechanisms and remain a safe and reliable source of technology that customers can use without fear. Pursuant to this, there are ongoing obligations that you must continue to fulfil after you have been licensed to provide e-wallet services in Singapore. Some of these ongoing obligations include:
- Anti-money laundering obligations – you must take active measures to ensure that your service does not become a haven for money launderers to utilise and misuse. You will be required to comply with the Anti-Money Laundering and Countering the Financing of Terrorism legislation and regulations, and notices.
- Cyber hygiene – with incidents of hacking and stealing personal information becoming even more widespread, it becomes important to maintain a good cyber hygiene – the continual acts of updating your security patches and security standards to safeguard your system, and maintaining a viable malware protection software. You may even consider implementing a multi-factor authentication method to ensure that customers are not defrauded in the event that illegitimate transactions are made.
- Annual audit requirements – given the large quantities of money that people may choose to retain in their e-wallets, it is no surprise that a licensed payment service provider is required, on an annual basis, to appoint an auditor to carry an audit of its accounts and transactions and provide the audit report to MAS.
- Business conduct – you may also be required to comply with business conduct requirements set out in the Payment Services Act and the Payment Service Regulations. These include keeping a record of transactions and the issuance of receipts.
The allure of running an e-wallet service is something that cannot be sidestepped easily. However, as you can see from the points raised, providing an e-wallet service in Singapore is no simple feat. There are many legal rules and regulations that your business will have to comply with (for good reasons), and these rules and regulations apply not only from the time you make the application but also extend to when you are actually maintaining the service.
It may therefore be useful for you to consult one of our fintech lawyers, who will be able to advise you on the procedure for applying for a licence to operate an e-wallet service in Singapore. He or she will also be able to advise you on fulfilling your ongoing obligations once you have obtained your licence.
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