Payment Services Act: Does Your Fintech Business Need a Licence?
What is the Payment Services Act (PSA)?
The Payment Services Act (PSA) provides for the licensing and regulation of payment service providers and the oversight of payment systems.
While the PSA has already been passed on 14 January 2019, it will only come into operation on a future date.
In the meantime, fintech (i.e. financial technology) businesses should be clear about their payment services obligations under the PSA, and make the required preparations.
What Payment Services Fall Within the Scope of the PSA?
For the purposes of the PSA, the following services are considered payment services:
- Account issuance services: services that issue a payment account, or relate to operations required for operating a payment account. This could include an e-wallet or a non-bank issued credit card.
- Domestic money transfer services: services that provide fund transfer services in Singapore. This could include payment kiosk or payment gateway services.
- Cross‑border money transfer services: services that provide for inbound and outbound fund transfer remittance services in Singapore.
- Merchant acquisition services: where a service provider accepts and processes payment transactions for a merchant. This could include the operation of online payment gateways or the provision of point-of-sale terminals.
- E-money issuance services: services that allow for the issuance of e-money in Singapore so that users can pay merchants or transfer e-money to other individuals. Examples of e-money include money stored in e-wallets.
- Digital payment token services: services that provide for the buying or selling of digital payment tokens (e.g. cryptocurrencies), or provide a platform which facilitates the exchange of such digital payment tokens in Singapore.
- Money‑changing service: provides for the buying or selling of foreign currency notes in Singapore. This would include moneychangers which profit from the exchange of physical currency notes.
What Payment Services Do Not Fall Within the Scope of the PSA?
Certain payment services are removed from the scope of the PSA’s regulation regime. A few instances of such excluded services under the PSA are:
- E-money that is for a limited purpose such as pre-paid cards, the purchase of limited goods and/or services or particular loyalty programmes;
- Virtual currency that are for a limited purpose such as in-game assets or 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. This is as long as such payment services are incidental to or necessary for the conducting of the regulated activities permitted under those legislations.
PSA Obligations If Your Business Offers One or More of the Payment Services
If your business offers one or more of the payment services which are under the PSA’s scope, you will be required to apply for one of the following three licences:
1. Money-changing licence
A business holding a money-changing licence can conduct only money-changing services.
You must apply for the money-changing licence if you do not have in force a standard payment institution licence or a major payment institution licence that permits you to carry out money-changing services.
2. Standard payment institution licence
A business that conducts any combination of payment services below specified thresholds will need to apply for a standard payment institution licence.
The specified thresholds refer to accepting, processing, or executing a monthly average of:
- Payment transactions up to S$3 million for any payment service; or
- Up to S$6 million for two or more payment services,
in one calendar year.
These thresholds do not apply to e-money account issuance services, i.e. account issuance services which offer payment accounts that store e-money, or e-money issuance services.
3. Major payment institution licence
A business will need to apply for a major payment institution licence if:
- The business provides one or more of the 7 payment services mentioned above, except an e-money account issuance service or a money-changing service; and
- The average total value of all payment transactions by the business in one month exceed specified thresholds of:
- S$3 million for one payment service; or
- S$6 million for two or more payment services,
over a calendar year.
Where the business provides an e-money account issuance service, or an e-money issuance service, and exceeds the specified threshold of an average daily e-money float of up to S$5 million over a calendar year (mentioned above), it must also apply for a major payment institution licence.
A business holding a major payment institution licence will be regulated more comprehensively.
For example, each business would be required to maintain security of a prescribed amount with the Monetary Authority of Singapore (MAS) for the due performance of its obligations to its users.
Conditions for Application of Payment Services Licence
Standard payment and major payment institution licences
An applicant of a standard payment institution licence or major payment institution licence will have to:
- Be a company (incorporated in Singapore or overseas);
- Have a permanent place of business in Singapore or a registered office in Singapore; and
- The applicant must have at least 1 executive director who is a Singapore citizen or Permanent Resident, or a person belonging to a class of persons prescribed by MAS.
Upon being granted a licence, the applicant must satisfy such financial requirements and operational requirements, as the MAS may specify by notice in writing, for the duration of the licence.
An applicant of a money-changing licence must have a permanent place of business or a registered office in Singapore.
For all 3 licences
Additionally, for all the licences, the MAS must be satisfied:
- That the applicant is a fit and proper person under its Guidelines on Fit and Proper Criteria document;
- As to the financial condition of the applicant; and
- That the public interest will be served by granting the licence.
The applications must be accompanied by all the information the MAS requires and the payment of a non-refundable application fee.
Scope of Licences
All licensees (regardless of payment service(s) offered) are prohibited from granting any credit facility (i.e. loans that give access to funds as and when needed, as opposed to the entire loan sum being disbursed at once) to any person in Singapore.
If licensees do not comply with this prohibition, they will be guilty of an offence and liable on conviction to a fine up to $100,000 or $250,000 depending on which prohibition is contravened and if it is a continuing offence, to a further fine up to $10,000 or $25,000 for each day the offence continues after conviction.
Depending on the payment service(s) being offered, licensees may also have other obligations to comply with. Some of these are listed below:
Licensees providing account issuance services
Businesses holding licences to provide account issuance services such as e-wallets must not assist users in withdrawing e-money from their accounts and exchanging the e-money for Singapore currency if the user is resident in Singapore. They must also not enter into any agreement or arrangement that would make this possible.
If licensees do not comply with this prohibition, they will be guilty of an offence and liable on conviction to a fine up to $250,000 and if it is a continuing offence, to a further fine of up to $25,000 for each day the offence continues after conviction.
However, the business may allow the user to withdraw their e-money and exchange it for Singapore currency if the user terminates their account.
In addition, major payment institution licensees that provide account issuance services must:
- Restrict users from holding more than $5,000 in their e-wallets at any point in time
- Prevent users from transferring more than $30,000 within each year to accounts other than the user’s previously-nominated bank accounts
Licensees providing e-money issuance services
Licensees that provide e-money issuance services are also prohibited from:
- Lending any customer money; or
- Using any customer money, or interest earned on any customer money to finance any business activity.
If licensees do not comply with this prohibition, they will face the same penalty as non-compliant licensees of account issuance services (mentioned above).
For existing licence-holders under the Payment Systems (Oversight) Act (PS(O)A) and the Money-Changing and Remittance Businesses Act (MCRBA)
If you are an existing Stored Value Facility (SVF) licence-holder or a remittance licence-holder under the PS(O)A or MCRBA, you may not have to re-apply separately for a licence under the PSA.
Instead, you will have 6 months from the date of commencement of the PSA to inform the MAS in writing of the specific payment services that you are conducting. In that case, your existing licence will continue to be valid.
If you are holding a money-changing business licence under the MCRBA, you will be deemed as a money-changing licensee under the PSA. If you hold some other licence, you will be deemed as a major payment institution licensee under the PSA.
If you currently do not require a licence under the current regulatory framework (i.e. PS(O)A or MCRBA) but will need a licence under the PSA, you will have a 6 months’ grace period from the date of commencement of the PSA to submit your licence application.
During this grace period, you may continue to provide payment services.
If you are currently operating with a licensing exemption granted by the MAS, the exemption will continue to be valid unless the MAS withdraws the exemption. This might occur if, for example, you do not comply with any conditions or restrictions MAS has imposed in writing.
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