A Brief Overview of Guidelines on Licensing for Payment Service Providers

Introduction

In the ever-evolving landscape of financial services, Singapore's Payment Services Act (PS Act) takes centre stage, ushering in a new era of regulatory frameworks. At the heart of this act are three distinct licences, each catering to specific financial activities. Understanding the prerequisites for these licences is crucial for entities seeking to operate within Singapore's burgeoning payment services sector.

Money Transfer License (MC)

One of the three licences outlined in Chapter 6 of the PS Act is the Money Transfer License (MC). Entities exclusively involved in money transfer services should pursue this licence. However, there's a caveat; if MC licensees wish to offer premium services, a transition to a Standard Payment Institution (SPI) or Major Payment Institution (MPI) licence is mandatory.

Standard Payment Institution (SPI)

To qualify for a Standard Payment Institution (SPI) licence, your payment services must meet specific financial thresholds, 

• including S$3 million in monthly transactions for any single payment service (excluding e-money account issuance and money-changing services)
• S$6 million in monthly transactions for two or more payment services (excluding e-money account issuance and money-changing services)
• Maintaining S$5 million of daily outstanding electronic money (e-money).

Major Payment Institution (MPI)

With a Major Payment Institution (MPI) licence, there are no specified threshold limits on transaction volume or float for conducting multiple payment services. This exemption applies to:

• the S$3 million monthly transactions for any single payment service (excluding electronic money (e-money) account issuance and money-changing services)
• S$6 million monthly transactions for two or more payment services (excluding e-money account issuance and money-changing services)
• S$5 million of daily outstanding e-money

Money Changing Licence

If you offer money-changing services, such as buying or selling foreign currency notes, you are required to apply for a money-changing licence

Licence Change or Modification

Entities holding a licence may find the need to adapt as their services evolve. Should there be a desire to add or remove paid services or change the licence type, a formal request through Form 2 is required. Proactive planning, considering future commercial arrangements, and meeting new requirements are imperative. Notably, Specialized Payment Institutions (SPIs) aspiring to become MPIs should initiate the licence change process well before reaching specified thresholds.

Licence Application Criteria

For entities aspiring to obtain an SPI or MPI licence, meeting specific criteria is non-negotiable. Key individuals, including sole proprietors, partners, directors, and CEOs, must possess substantial experience in the payment services or related financial sectors. The ability to demonstrate effective supervision and control over business activities and employees is paramount.

Operational Requirements

• Presence at Registered Office: Licensees must have a designated person present at their registered office or permanent place of business for at least 10 days per month and eight hours each day during business hours.
• Share Capital: Applicants must inform the Financial Services Authority (FSA) how they meet share capital requirements, ensuring an adequate capital buffer over the equity requirement.
• Security Requirements (MPI): MPI licence applicants must provide the required security, either in the form of a cash deposit or a bank guarantee, before commencing business.
• Compliance Arrangements: The applicant must establish compliance arrangements appropriate to the nature, scale, and complexity of their business, with ultimate responsibility resting on key individuals.
• Audit Program and Annual Review: Applicants must develop an independent audit program and a plan to meet annual review requirements, with appointed auditors responsible for monitoring accounts, transactions, and compliance.

Assessment Criteria for Applicants

MAS scrutinises applicants based on various parameters, including:

• History and financial status.
• Work readiness and ability to comply with the law.
• Any ongoing investigations involving the applicant or related entities.
• Integrity of companies operating in Singapore.

Licence Application Process

Applicants meeting entry requirements should refer to Appendix 3 for guidance on submitting a licence application, including Form 1. Fees specified in the Schedule PSR must be paid by all registrants and licensees.

Post-Licensing Compliance

After securing a licence, ongoing compliance is imperative. Key obligations include:

• General Compliance: Licensees must comply with all requirements of the PS Act and any other applicable laws, establishing systems, policies, and procedures for ongoing compliance.
• AML/CFT Requirements: Compliance with Anti-Money Laundering and Combating the Financing of Terrorism Notices is mandatory, along with reporting suspicious activities and fraud incidents.
• Periodic Returns: Submission of periodic regulatory reports on payment services activities in accordance with the PSR is required.
• Cyber Hygiene: Licensees must comply with cyber hygiene requirements to protect customer data, as outlined in the Cyber Hygiene Notice.
• Business Conduct and Disclosures: Adherence to business conduct requirements, prohibitions, and restrictions is essential, along with accurate disclosures regarding the scope of the licence.
• Annual Audit: Annual appointment of an auditor to audit accounts and transactions, submitting the report to MAS, ensures ongoing compliance.

Business Plan Requirements

Applicants must present a comprehensive business plan, covering:

• Clear explanation of the business model.
• Demonstration of compliance with the PS Act and related supporting laws.
• Assessment of payment services at each transaction stage.
• Financial flow plans and channels, including transaction and process flow diagrams.
• Implementation plan, timelines, and involvement of third parties.

Specific Requirements for Different Payment Services

• Domestic Money Transfer Service:
  • Demonstration of meeting the 3 and 7 business day deadlines for domestic and cross-border remittances.
  • Proposed corrective actions if deadlines cannot be met.
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• Electronic Money Transfer Service:
  • List of account providers and third parties supporting electronic funds, with explanations on proper recording and accounting.
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• Digital Price Tag Service:
  • Risk assessment of digital signage services.

Additional Requirements

• Third Parties:
  • Details on third parties, including names, operating jurisdictions, and licensing/registration status. A framework for assessing and maintaining oversight of third-party relationships, aligning with MAS Notices PSN01 and/or PSN02.
• Technology Risk Management:
  • Framework for assessing and managing technology risks, with measures to protect customer data, transactions, and systems. Adherence to the Technology Risk Management Guidelines is essential.

• Safeguarding:
  • Details of safeguarding arrangements, including names of institutions, draft contracts, and systems/processes to comply with timelines in section 23 of the PS Act. Compliance evidence is required before commencing business.

• SPI Threshold Monitoring:
  • Description of planned threshold monitoring measures for SPI licence applicants. This includes all systems, policies, and procedures, specifying limits, monitoring frequency, and actions in case of approaching thresholds.
  Compliance and Audit:
  • Various information and documents in line with the proposed business model, including AML/CFT policies, enterprise-wide risk assessments, governance arrangements, compliance management arrangements, compliance officer details, staffing arrangements, and internal/external audit plans.

Conclusion

In Singapore's Payment Services Act, the licensing journey for Payment Service Providers (PSPs) is clearly outlined. The three licences—Money Transfer (MC), Standard Payment Institution (SPI), and Major Payment Institution (MPI)—offer a structured approach catering to diverse services. From stringent application criteria to ongoing compliance, the regulatory framework ensures comprehensive oversight, addressing aspects such as Anti-Money Laundering, periodic reporting, and cybersecurity. Overall, the licensing requirements provide a robust foundation, encompassing various payment services and positioning Singapore as a vigilant and secure hub for financial innovation.

For more information please refer to the MAS page: Licensing for Payment Service Providers

You can also check out the requirements and your eligibility for a payment licence with this simple tool offered by MAS: Licensing Self-Check