10 things you need to know about the MAS Payments Consultation Paper

This article is written by and published on behalf of OC Queen Street.

The
Monetary Authority of Singapore (MAS) released a public consultation paper on
25 August 2016 on the proposed changes to the payments regulatory framework and
establishment of a centralised National Payments Council. This is the first in
a series of consultations on the Proposed Payments Framework (PPF) and National
Payments Council (NPC), and is focused on obtaining broad-based feedback on the
proposed enhancements to regulation and governance of the Singapore payments
landscape. The public consultation paper seeks feedback on the foregoing. Listed below are a series of frequently asked questions that captures the essence of the consultation paper.

What
does MAS want to achieve by creating the new Proposed Payments Framework?

The objective of MAS is twofold, firstly to streamline Singapore’s payments regulations regime by
combining the Payment Systems (Oversight) Act (PS(O)A) and the Money-changing
and Remittance Businesses Act (MCRBA) into a single regulatory framework, and secondly to
provide better oversight over the payments ecosystem.

Why
does MAS want to change the old regulations? (MCRBA and PS(O)A)

Singapore’s payments regulation currently cuts across two pieces of
legislation: the Payment Systems (Oversight) Act (PS(O)A) and the
Money-changing and Remittance Businesses Act (MCRBA), which governs stored
value and remittance respectively. However, with the increasing complexity of
payment service providers and the advent of new technology in this sphere, the lines between the
traditionally delineated payments systems and remittances business is
increasingly blurred resulting in new threats to consumer confidence and to the
financial payments system. As the payments system gets increasingly
sophisticated, regulatory gaps are appearing which the MCRBA and the PS(O)A does
not address. A single regulatory framework will provide better oversight to
respond to emerging risks such as cyber security and aims to provide a holistic,
flexible and forward looking approach to regulate the payments ecosystem.

What
are the changes that I need to take note of?

Under
MCRBA, companies in the money changing and remittances business have to get a separate licences for each of the previously mentioned business activity Under the proposed framework, it is envisaged that only one licence will be
required.

Payments activities presently regulated under the PS(O)A do not need a licence. Only designated payment systems that are considered important for financial stability or for public confidence are regulated. In the new proposed framework, it is envisaged that licencing will be required for entities engaging in any of the 7 payment activities set out below.

What
are the payments activities that will be regulated?

Activity 1: Issuing and maintaining
payment instruments, such as payment cards, payment accounts, e-wallets and
cheques.
This would presumably include debit cards, credit cards, ATM cards, charge cards
and stored value cards irrespective of whether the funds are “held” on the card
itself or linked to a funding source (such as a deposit account or credit
facility).

Activity 2: Acquiring payment transactions, such as physical and online merchant
acquisition services, merchant aggregators and master merchants. Merchant
acquiring is an integral part of card payment transactions processing.
Acquirers enable merchants to accept card payments by acting as a link between
merchants, issuers, and payment networks — providing authorization, clearing
and settlement, dispute management, and information services to merchants. The
merchant acquiring industry is typically dominated by a few large players.¹

Activity 3: Providing money transmission and conversion services, such as domestic
and in-bound/out-bound cross-border remittance services, currency-conversion
services, and virtual currency intermediation services. Money transmission
activities includes brick & mortar and online activities, for both inward
& outward remittances, but excludes payment purely for goods &
services. Virtual currency intermediaries which
buy, sell or facilitate the exchange of virtual currencies, such as Bitcoin would also presumably fall under this activity. 

Activity 4: Operating payments
communication platforms², such as payment gateways, payment
processors and kiosks. Activities which are included would presumably
include processing of payment instructions, authorisation of payment
instructions, and payment intermediating between merchants and acquirers.

Activity 5: Providing payment instrument aggregation services³, such as payment card aggregation and bank
transaction account aggregation. Within the scope are services, mobile apps and
portals that aggregate and initiate payment instructions. This presumably would
include bank account aggregation web portals such as Canopy and mobile payment
apps such as OCBC Apple Pay – which allows user to aggregate multiple cards
issued by various banks to initiate payment instructions.

Activity 6: Operating payment systems
which facilitate the transfer of funds through processing, switching, clearing,
and/or settlement of primary transactions. This would probably include ATMs and
the Singapore Automated Clearing House (SACH) – responsible for providing,
facilitation and overseeing cheque and debit & credit card clearing
services on behalf of its member organisations.

Activity 7: Holding stored value facilities (SVFs), such as prepaid cards
(including prepaid phone cards) and prefunded e-wallets (including NETS
FlashPay, NETS CashCard, Ez-link card and SYOG PPC) on behalf of the other users. Notably, SVFs with stored
value under $30 million that were previously outside MAS scope of regulation
will now be subjected to oversight under the PPF.

Who
will be affected by the PPF and how?

At
present, MAS intends that the licensing will apply to locally established
payment service providers only. Banks will continue to be exempted from
obtaining a separate licence under the PPF to conduct payment activities as
they are under the Banking Act.

What is the National Payments Council (NPC)?

The NPC is envisaged to be an umbrella organisation for all payment systems in Singapore and to also act as a central governing body for Singapore’s payments ecosystem. 

Who
is in the NPC?

MAS
will chair the NPC board meetings and be responsible of approving appointed NPC
board members. The NPC board will be selected and appointed from a wide
spectrum of payment industry players from both the demand and supply side.

Operators
and providers of payment systems under activity 6 of the PPF are also envisaged
to have a voice in the NPC, which is likely to include existing Designated
Payment Systems⁴, SACH and other participants of payment systems in Singapore,
such as widely used public transport cards (WASVFs) and international card
schemes (MasterCard/Visa).

Why
do we need the NPC?

While
Singapore is a technologically advance nation, its payment landscape is
fragmented due to different models of governance and payment solutions and
lacks interoperability. Cash and cheque based payments are still substantially
relied upon by consumers and businesses, all of which translates to
inefficiencies and higher costs to consumers and businesses.

The
NPC aims to consolidate the payments landscape and increase adoption of
electronic based payments by consumers and businesses by driving payments
efficiency, adoption and harmonisation in a centralised effort. The NPC aims to
achieve its objective by fostering innovation, competition and collaboration in
the payments industry. The NPC will also assume the role of the Singapore
Clearing House Association (SCHA⁵).

What
are the powers of NPC?

The
proposed powers for the NPC include: powers to establish rules and regulations
relating to the participation of the payment systems that it governs, powers to
require system enhancements and implement new standards for the payment systems
under its purview, powers to determine membership fees, powers to determine
guidelines and policies pertaining to the payments ecosystem and powers to
issue advisories to payment system operators and scheme participants. NPC’s
observance may also be taken into consideration in MAS assessment on the
licensing status of operators and participants under the PPF.

How do I provide my feedback to MAS?

You can participate in the consultation paper by making a submission to:
FinTech & Innovation Group
Monetary Authority of Singapore
10 Shenton Way, MAS building
Singapore 079117
Email: payments_consult@mas.gov.sg

The template document for response to the consultation paper is available on the MAS website.

The public consultation end 31 October 2016.

References:

MAS public consultation paper: “Proposed Activity-based Payments Framework and Establishment of a National Payments Council”
KPMG Singapore Payments Roadmap, Enabling the future of payments 2020 and beyond – August 2016
Capgemini report: Challenges & Opportunities for Merchant Acquirers.

¹Capgemini report: Challenges & Opportunities for Merchant
Acquirers

²The
definition of payment communication platforms will be further specified in
subsequent rounds of public consultation.

³The
definition of payment instrument aggregation services will be further refined
in subsequent rounds of public consultation.

⁴ DPS are payment systems deemed to be of systemic importance
to the financial system of Singapore or deemed to have material effect on
public confidence in payments and/or financial system of Singapore should the
system fail.

⁵ The Singapore Clearing House Association currently manages
and administers the clearing services for cheque, debit and credit items of its
members. It also defines the rules and conditions governing the member banks
and operators of the SGDCCS, USDCCS, IBG and FAST systems.

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