Regulating the Next Generation of Payment Services: An Overview of the New Regulatory Framework under the Payment Services Bill



Regulating the Next Generation of Payment Services: An Overview of the New Regulatory Framework under the Payment Services Bill

A photo of the Monetary Authority of Singapore

Date Published: 18 December 2018

Authors: Bill Jamieson and Ken Chia.



On 19 November 2018, following two rounds of public consultation over the past 3 years, the Monetary Authority of Singapore (“MAS”) finalised its new regulatory framework for payment services under the Payment Services Bill (the “Bill”), which was read in Parliament for the first time. The Bill streamlines the payment services regulatory framework under a single piece of legislation, meaning that the Payment Systems (Oversight) Act (Cap. 222A) (“PS(O)A”) and the Money-Changing and Remittance Businesses Act (Cap. 187) (“MCRBA”) will both be repealed at the commencement of the new law.

The Bill provides a necessary update to the regulatory framework of payment services in Singapore, in light of the recent proliferation of new and varied payment business models, such as Grab Holdings’ Grabpay, PayNow, cryptocurrency wallets and cryptocurrency exchanges, each accompanied with risks which may not be adequately regulated under the PS(O)A and MCRBA.


Scope of regulation

Under the Bill, MAS has introduced two parallel regulatory frameworks, namely:

  • a designation regime that enables MAS to regulate operators, settlement institutions and participants of systemically important payment systems, such as interbank services, as “designated payment systems” for financial stability and efficiency; and
  • a licensing regime that enables MAS to regulate providers of retail payment services to customers and merchants.


Designation and regulation of payment systems

MAS may designate a payment system as a designated payment system if it is satisfied that:

  • a disruption in the operations of the payment system could trigger, cause or transmit further disruption to participants of the payment systems or the financial system of Singapore, or affect public confidence in the payment systems or the financial system of Singapore;
  • the payment system is widely used in Singapore or may have an impact on the operations of other payment systems in Singapore and such designation is necessary to ensure efficiency or competitiveness in the services provided by the operator of the payment system; or
  • the designation is in the interests of the public.

Under the Bill, MAS may impose conditions or restrictions as it thinks fit in relation to the activities undertaken by or the standards to be maintained by the operator or settlement institution of a designated payment system, or require such operator or settlement institution to operate as a corporation.


Licensing of retail payment service providers

Under the Bill, the following payment services will be regulated:




Under the Bill, MAS will adopt a modular approach to licensing payment services, under which payment service providers are not required to obtain a licence individually for each of the payment services they offer, but are required to obtain a licence in one of three classes of licences that corresponds with the level of risk posed by the scale of payment service they provide, namely:



major payment institution licence, standard payment institution licence and money changing licence


Existing payment service providers who hold:

  • a remittance licence under the MCRBA;
  • a money-changer’s licence under the MCRBA; and/or
  • an approved holder of a stored value facility under the PS(O)A,

will be deemed to have been granted a major payment institution licence that entitles them to carry on a business of providing cross-border money transfer service, money-changing service and/or e-money issuance service respectively.


Regulating Key Risks of Payment Services

The Bill also provides MAS with wide-ranging power to regulate payment service providers and mitigate four key risks applicable to payment service providers identified by MAS, namely:

  • money-laundering (“ML”) and terrorism financing (“TF”);
  • loss of funds owed to consumers or merchants due to insolvency;
  • fragmentation and limitations to interoperability; and
  • technology and cyber risks.

The extent of risk mitigating measures which will be imposed on payment service licensees will depend on the specific payment services they provide. Major payment institution licensees may be subject to stricter regulation by MAS, who may:

  • direct major payment institution licensees to adopt any common standard, be a participant of a payment system or enter into an arrangement with the operator of a payment system, in order to ensure interoperability between payment accounts and a payment system;
  • maintain security of a prescribed amount with MAS for the due performance of their obligations of a major payment institution to its customers;
  • safeguard customer monies through an undertaking by any bank in Singapore or prescribed financial institution to be fully liable to the customer for such monies, a guarantee by such bank or prescribed financial institution or depositing such monies in a trust account.

Payment service providers will continue to be subject to the anti-ML and counter-TF obligations imposed by the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A), the Terrorism (Suppression of Financing) Act and relevant international regulations, and will need to comply with ML/TF risk mitigating measures imposed by MAS from time to time.

The Bill provides transitional arrangements of between 6 and 12 months, allowing payment service providers sufficient time to comply with the regulatory requirements under the Bill. Therefore, in light of the upcoming changes to the regulatory and licensing framework under the Bill, we encourage existing and potential payment service providers to start assessing if the services they provide fall within any of the payment services regulated by MAS under the Bill, and if so, which licence will they be required to obtain.

Disclaimer: This update is provided to you for general information and should not be relied upon as legal advice.


CNPLaw’s Corporate Lawyers

Bill Jamieson is a Partner at CNPLaw LLP. Bill is an English lawyer who is also registered to practise Singapore law in the areas of corporate law, banking and finance and securities laws. He enjoys working in the diverse and dynamic Asian market and helping his clients to achieve their goals.

    Bill’s practice focuses on corporate financing transactions, investment funds, mergers and acquisitions, private equity, and employment law matters. His experience includes 10 years in the City of London and over 20 years in Asia. Before joining CNP, Bill was a partner in a well-known international law firm. He is recommended lawyer for Corporate and M&A, Banking and Finance, Investment Funds and Labour and Employment in Legal 500 Asia Pacific 2021. Bill is one of the firm’s contacts for Interlaw, a network of independent full-service corporate law firms ranked by Chambers and Partners in its highest category, “Elite”, amongst all global law firm networks.

    Ken Chia Legal Partner at CNPLaw LLP image


      Ken heads the Corporate advisory team in the firm and has an international focus in his corporate and M&A work and worked in business development positions with various subsidiaries of the Hang Lung Group in Shanghai and with Informa plc in Singapore. Ken is “Recommended” by The Legal 500 Asia Pacific 2021 for the Corporate and M&A practice and is rated as a “Notable Practitioner” in the IFLR1000 Thirtieth Edition.

      We advise both private and public (whether listed or non-listed) companies on corporate governance and compliance issues to help them acclimatise and thrive in a regulatory landscape that is becoming increasingly complex.

      Besides providing general advice on director duties and corporate secretarial matters, we help our clients better appreciate the licensing and compliance regimes applicable to the industries that they operate in and review our clients’ administrative and operational procedures for consistency with industry standards.

      The lawyers from the Banking & Finance Practice Group (BFPG) have always taken pride in providing a comprehensive range of banking and finance services to our clients, including domestic and foreign international banks, other financial institutions as well as non-bank lenders and borrowers, and foreign legal firms acting for parties outside Singapore.

      Our banking & finance practice covers the whole spectrum of domestic and international banking & financing work, including restructurings, financings and financial institutions advisory work. We can draw upon a broad base of partners, senior, mid-level and junior associates, all with strong and varied banking & finance product line and country experience.

      Our reach is further widened and enhanced by our ability to draw upon the resources of our network of correspondent firms in the region and globally.

      We have a particular passion and interest in blockchain technology applications, cryptocurrencies and ICOs. We currently advise issuers of tokens, ICO advisors, venture capital firms and entrepreneurs involved in this space on Singapore legal issues and regulatory compliance for a range of planned business activities, ranging from utilization of blockchain to enable business applications in diverse fields (including money remittance, solar energy, consumer rewards, structured social interaction; music and entertainment industry; holiday & leisure industry; employment marketplace, consumer rewards, crypto asset security applications); to setting up cryptocurrency exchanges and issue of tokens on proprietary platforms.