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PSP – Payment Service Providers
MAS – Monetary Authority of Singapore
Payment Services Act Licensing
The PS Act came into force on January 28, 2020. Previously, regulation of payment services was governed by the Payment Systems (Oversight) Act (“the PS(O)A”) and the Money-changing and Remittance Businesses Act (“the MCRBA”). The regulations from these two older Acts were modified and merged into the PS Act, and these Acts are now repealed.
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.
Payment Services Not Falling Within the Scope of the Payment Services Act
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 programs;
- 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.
Obligations Under the Payment Services Act 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 licenses:
1) Money-changing license
2) Standard payment institution license
3) Major payment institution license
1. Money-changing license
A business holding a money-changing license can conduct only money-changing services.
You must apply for the money-changing license if you do not have in force a standard payment institution license or a major payment institution license that permits you to carry out money-changing services.
2. Standard payment institution license
A business that conducts any combination of payment services below specified thresholds will need to apply for a standard payment institution license.
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.
Instead, such service providers will need to apply for a standard payment institution license if they issue an average daily e-money float of up to S$5 million over a calendar year.
3. Major payment institution license
A business will need to apply for a major payment institution license 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 license.
A business holding a major payment institution license 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.
Requirements to Apply for a Payment Services License
Standard payment and major payment institution licenses
An applicant of a standard payment institution license or major payment institution license 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 license , the applicant must satisfy such financial requirements and operational requirements, as the MAS may specify by notice in writing, for the duration of the license .
An applicant of a money-changing license must have a permanent place of business or a registered office in Singapore.
For all 3 licenses
Additionally, for all the licenses, 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 license.
The applications must be accompanied by all the information the MAS requires and the payment of a non-refundable application fee.
Scope of Payment Services Licenses
All payment services 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 licenses 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). License-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) license -holder or a remittance license -holder under the PS(O)A or MCRBA, you may not have to re-apply separately for a license 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 license will continue to be valid. If you are holding a money-changing business license under the MCRBA, you will be deemed as a money-changing licensee under the PSA. If you hold some other license, you will be deemed as a major payment institution licensee under the PSA. If you currently do not require a license under the current regulatory framework (i.e. PS(O)A or MCRBA) but will need a license under the PSA, you will have a 6 months’ grace period from the date of commencement of the PSA to submit your license 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. If you need legal advice on complying with the PSA, please consult one of our experienced corporate lawyers.
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