The first step for payment service providers is to understand the regulatory classification of the payment service(s) they are providing, including to consider whether they may require a license beyond payment services such as a license for dealing in securities.

There are 6 different kinds of payment service activities[1] under the Payment Services Act 2019 (PS Act):

• An account issuance service
• A domestic money transfer service
• A cross border money transfer service
• A merchant acquisition service
• An e-money issuance service
• A digital payment tokens service
• A money changing service

We will discuss and describe each of the services in greater detail to help you understand the specific license you will require under the Payment Services Act 2019.

Account Issuance

Account issuance services are services[2] where a payment service provider provides any customer a facility, whether electronic or physical, that is held in the customer(s) name to receive instructions for payment and/or to execute payment instructions[3].

Virtually all payment services business, will require to create accounts for their customers. Without an account issuance service, the business will not be able to receive and execute payment instructions. As such, most payment service providers will have this business activity declared in their application. Please also be mindful and advised that representing the payment instructions of a customer will also fall squarely under this provision.

Domestic Money Transfer Service

Domestic money transfer service is the service of accepting or receiving money for the purposes of transmitting, or arranging for the transmission of, the money or arranging receipt of any money from a payer in Singapore to a payee in Singapore[4].

In most circumstance, we cannot think of a business that will provide this as an independent service. Domestic money transfer services are well covered by banking level providers with facilities such as PayNow a Singaporean electronic money transfer service.

There may however be businesses that will require to obtain licensing for this activity where they provide it as an ancillary function such as where a stored value for fiat allowing transfers between Singaporean customer accounts. This licensed activity will also be necessary where the provider of a payment service interacts with the flow of funds from one Singaporean domiciled account to another Singaporean domiciled account, such as an escrow agent[5].

Cross-border Money Transfer Service

Cross-border money transfer service is the service of accepting or receiving money for the purposes of transmitting, or arranging for the transmission of, the money or arranging receipt of any money between a person in and a person outside Singapore[6].

These services generally apply to traditional remittance service providers such as Western Union, or Zhong Guo remittance which provide cross-border remittance.

Because the service includes accepting money for moving from a person outside Singapore to a person in Singapore or from a person in Singapore to a person outside Singapore, cross-border money transfer services capture contra-balance sheet activities. Contra-balance sheet is an activity where a local company writes off its debts by having the local payee clear its assigned local payment obligations in exchange for it discharging the cross-border payment obligation of the payee abroad. While no money has moved cross-border, the act of accepting the money to make contra-balance sheet arrangements will be captured by the Payment Services Act 2019.

Merchant Acquisition Service

Merchant acquisition service is the service of accepting and processing a payment transaction for a Singaporean merchant[7] under a contract governed by Singapore law[8] between the provider of the service and the merchant, which results in a transfer of money to the merchant pursuant to the payment transaction, regardless whether the provider of the service comes into possession of any money in respect of the payment transaction.

This service is largely akin to electronic payment gateways such as Braintree, Paypal and Swipe. However, it may also capture corporate services such as accounting firms that handle the all the payment transaction and invoice financing or factoring on part of their customers through their accounts or through a special purpose vehicle.

E-money Issuance Service

E-money is any electronically stored monetary value denominated in any fiat currency or pegged by its issuer to any fiat currency.

Digital Payment Tokens Service

The digital payment token service is perhaps the most complicated of all payment services because it requires an independent assessment and classification by legal experts as to whether a digital token that is offered by a payment service provider is a digital payment token.

A digital payment token is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt. Because of advancements in technology, many consumers also use digital payment tokens as a vehicle for investment. You may wish to consider consulting our previous article on the classification of tokens for better clarity.

If a provider deals, facilitates, or facilitates the dealing of digital tokens that are for payment services (s”) then that provider will need to get licensed for the activity of being a digital payment service provider.

Money-Changing Service

Money-changing service means the service of buying or selling foreign currency coins or notes[9]. It is the very traditional business of exchanging hard currency notes as a business. More importantly this business requires the physical delivery of currency notes. This can include online purchases for foreign currency notes fulfilled by physical delivery of the exchange notes.

However, please be mindful that the online exchange of online currencies, i.e. the digital representation of USD paid by Visa or MasterCard, will not amount to a money-changing service. Instead, these amounts constitute e-money that may trigger licensing under a different payment service.

Summary

Save for the money-changing service (which has a strand of licensing in its own right), any other activity will require either a standard payment institution license or a major payment institution license.

We have summarised each of the regulated activities to assist you with an idea of whether your financial business activity will require licensing. If you feel you require further consultation on this matter, please do not hesitate to reach out to us to discuss the matter further so that we may help you to get a more comprehensive overview.

[1] S.6 PS Act

[2] Part 3 Schedule 1, Payment Services Act 2019

[3] “Payment Account”, Payment Services Act 2019

[4] “Domestic money transfer service” Part 3 Schedule 1, Payment Services Act 2019

[5] “domestic money transfer service” (d) Part 3 Schedule 1, Payment Services Act 2019

[6] “Cross-border money transfer service” or “domestic money transfer service” Part 3 Schedule 1, Payment Services Act 2019

[7] “merchant acquisition service” (a) Part 3 Schedule 1, Payment Services Act 2019

[8] “merchant acquisition service” (b) Part 3 Schedule 1, Payment Services Act 2019

[9] “money-changing service” (b) Part 3 Schedule 1, Payment Services Act 2019