In 2019, the Parliament of Singapore passed a new Payment Services Act (the “PS Act”) that aims to create a contemporary regulatory framework for payment service providers and payment systems in a country that is well known for providing favorable conditions for the FinTech industry.
The PS Act came into effect on 28 January 2020 and is aimed at streamlining the process for licensing and operation of payment services providers in Singapore.
Regulated payment services
A major part of the PS Act is devoted to the licensing of payment service providers. The bill includes seven (7) services which require a licence to be performed in Singapore. The services are as follows:
- Account issuance services;
- Domestic money transfer services;
- Cross-border money transfer services;
- Merchant acquisition;
- Electronic money issuance;
- Digital payment token services and
- Money-changing services.
Types of licenses
For any combination of the above mentioned 7 services, a licensee must have the respective license. The only exception is money-changing services which can be performed with a simple Money-Changing License unless the licensee has a Standard Payment Institution Licence or Major Payment Institution Licence which allows it to carry on such service.
For the other services, a licensee must acquire:
- A Standard Payment Institution License or
- A Major Payment Institution License
To determine which license is applicable to your business, you must ascertain if your business meets certain specified thresholds.
The specified thresholds refer to accepting, processing, or executing a monthly average of:
- Average monthly transactions over a calendar year not exceeding S$3 million;
- Average daily E-money float over a calendar year not exceeding S$5 million.
Once any of these thresholds is reached the payment service provider must obtain the license for a major payment institution.
If your business conducts any combination of payment services that fall below the specified thresholds, you will need to apply for a Standard Payment Institution Licence.
Entities with this license are permitted to hold an e-money float of up to S$5 million.
Where the specified thresholds are exceeded, you must obtain a Major Payment Institution Licence.
If your business provides an e-money account issuance service, or 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, you must also apply for a Major Payment Institution Licence.
Requirements for licensees
To apply for a Standard Payment Institution Licence, you must:
- Be a company registered in Singapore / overseas and have a permanent place of business / registered office in Singapore;
- Have at least 1 executive director who is a Singapore Citizen or Singapore Permanent Resident; or
- Have 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);
- Satisfy prescribed financial and operational criteria; and
- Have a minimum base capital of S$100,000
Each license application is reviewed by the Monetary Authority of Singapore (MAS) which takes into account, among others, factors like financial condition and track record of the applicant, qualification and experience, ability to comply with obligations under the PS Act.
All applicants are required to pay a non-refundable license application fee. The fee depends on the license type and payment services applied for.
An application for Money-Changing Licence costs S$500. A Standard Payment Institution Licence application costs S$1,000 or more (maximum S$5,500) depending on the payment services chosen. A Major Payment Institution Licence application ranges from S$1,500 to S$8,000.
In addition to this, a licensee must also pay an annual license fee and applicable fees depending on the payment services that they are licensed to conduct.
Losing the license
A licensee can lose their respective payment institution license if they:
- Do not commence business within 6 months of the grant of license;
- Cease to provide payment service for 6 months;
- Do not conduct any payment transaction for 6 months;
- No longer cover the license criteria provided for in the PS Act.