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Balancing Payments Innovation and Risk Management: Singapore’s Payment Services Act of 2020

Singapore’s new Payment Services Act took effect in January 2020. According to industry observers, the Act succeeds at balancing Singapore’s interest in continued technological innovation in payments with regulatory certainty and consumer protection..

The Act also brings new coherence to the country’s regulatory requirements for various payment services, regulating seven types of licensable payment services: account issuance services, domestic money transfer services, cross‑border money transfer services, merchant acquisition services, e-money issuance services, digital payment token services, and money‑changing services. It prescribes three types of licenses that service providers are to choose form and obtain: money‑changing license, a standard payment institution license, and a major payment institution license.

The requirements are commensurate to the risks posed by the scope and scale of services provided by the licensee. However, all payment service providers holding a license under the Payment Services Act must meet anti-money laundering and countering the financing of terrorism (AML/CFT) requirements. Singapore-licensed banks, merchant banks, finance companies, and credit card or charge card issuers are exempt from licensing but still must adhere to their pre-existing obligations.

The Act is considered to be a forward-looking and flexible regulatory framework that mitigates the risks emerging from activities that fall beyond the scope of previous regulatory regimes. These risks consist mostly of loss of customers' money, money laundering or terrorist financing risks, fragmentation and lack of interoperability across payment solutions, and technology risks, including cybersecurity risks.

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