High risk credit card processing will be facilitated by new regulations in Singapore.
The Monetary Authority of Singapore (MAS), a supervisor and regulator of all financial institutions in Singapore, has launched a new iteration of the Payment Services Act (PSA).
Initially passed by the Singaporean Parliament on January 14, 2019, PSA provides the framework for regulation within the payment systems industry.
Under the new Payment Service Act, which was implemented in January 2020, it has included new variations of payment services, including “digital payment token services”. It has also taken on an, “an activity-based licensing framework”. These efforts have been implemented in order to reinforce the protection of consumers as well as inspire trust in making e-payments.
According to Chua Tju Liang, the director of corporate and finance at Drew & Napier, under the PSA licensing, only one license is required for the payment service provider. Strategies to lower risk are customized to the particular payment services that the license offers. This further protects funds for both the merchant and the customer. It also addresses and exercises effective controls against terror financing and money laundering. It will also serve to reinforce standards in technology and cybersecurity.
What Payment Services Will Fall Under The New Regulation?
A total of seven categories will be included for license and regulation. Elaine Chan, joint head of the financial services regulatory practice at WongPartnership, mentions the following, “account issuance, e-money issuance, domestic money transfer services, cross-border money transfer services both in-bound and out-bound, merchant acquisition and digital payment token services”.
The increasing complexity of the payments space has ushered in the expansion of “licensable” payment services. This, along with the increased number of new participants and advanced payment solutions being launched into the market.
The goal of the new framework is to combine the regulation of all pertinent segments within the “payments ecosystem” in Singapore. This will in turn, enhance “interoperability”, encourage consumer confidence, and to promote the use of e-payments.
What About Digital Payment Tokens?
Due to the nature of the industry, digital payment service providers are already regulated to make sure they have the proper AML (Anti Money Laundering) measures in place. However, before they can apply for licensing under PSA, the applicant must meet the appropriate requirements.
Once that requirement has been met and approved, businesses can commence their operations in Singapore.
Although it can be argued that this type of stringent regulation could hamper innovativeness, it actually sets the stage for a better future.
For digital payment token service providers, this could be an advantageous and safe environment to operate. Those businesses that are serious in making Singapore their new hub will find that these very stringent regulations are actually “regulatory safeguards” for those operating high risk businesses.
On one hand there is heavy regulation, on the flip side, these same regulations give way to an “unregulated space” in which payment service providers can play and explore innovation with abandon.
With Singapore’s payment ecosystem growing with new players in the fintech industry, these new regulations are putting the city-state in the best position to benefit most from new and growing levels of innovation.
With banks in Singapore recognized as being “early adopters” of technology within the financial services sector, the obvious result will be granting customers more choice and better service.