Singapore's new payments rules aim to put consumers first

The recently announced Payment Services Act by the Singapore government seeks to address the balance between supporting the shift to a cashless society, enabling technology companies to run fast and develop innovative new solutions, whilst at the same time protecting the public.

The rapidly evolving payments space has left consumers and merchants, from taxi drivers to bike rental companies, with a rapidly growing array of electronic payments methods. This breakneck speed of development has brought consumer benefits, but it has also brought significant potential problems. In the race to quickly secure a share of the pie, new payment providers have promoted instant signup and offered enticing incentives with sometimes limited risk management mitigations. With light-touch know-your-client (KYC), and hardly visible terms and conditions, these systems don’t have the protections of their predecessors, debit and credit cards.

The onus has been pushed onto the customer to educate themselves on the use of the payment service and its associated risks. These range from account hijacking, to cyber-attacks, breaches and mass data leaks. This is particularly critical when it comes to e-wallets where money can be transferred without limits, assurance of recourse and few legal processes to protect consumers. No wallet provider has announced statistics to date but there are cases of dispute and legitimate concern for suspicious transfers.

The new Act addresses these concerns. It consolidates and replace The Money-Changing and Remittance Business Act (Cap. 187) and the Payments Systems (Oversight) Act (Cap.222A). This expands the scope of regulated activities beyond stored value facilities (SVF), remittance and money changing services to include payment account issuance, domestic money transfer, and merchant acquisition services, and allows MAS to be able to impose user protection across a wider range of payment activities.

But where other regulators will take note is in the dual-track regulatory framework that has been introduced. This regulates large and small payments providers in a way that protects consumer interests but doesn’t stifle innovation.

The changes will impact businesses in different ways across the ecosystem, but they also provide a clear and flexible framework for future development. In the National Day Rally in 2017, when Prime Minister Lee Hsien Loong point spelled out the case for electronic payments, he also highlighted the fragmentation in the system when he said, “In Singapore, we too have e-payments, but we have too many different schemes and systems that do not talk to one another. People have to carry multiple cards, and businesses have to install multiple readers. It is inconvenient for consumers, and it is costly for businesses. And the result is, most of us still prefer traditional modes of payment – 6 in 10 transactions are cash and cheques.”

The Payments Act provides much needed clarity on the guardrails around electronic payments, but the problem remains that consumers and merchants are being bombarded with payments methods, wallets and devices.

The next stage of development in the payments industry in Singapore will be driven by convenience to the user – be they the end consumer or the merchant seeking payment. Over time, the subsidies will come to an end and convenience will win. Multiple payment devices will be consolidated by mobile point of sales devices that harness low cost contactless payments, whilst consumers will gravitate to a single solution rather than multiple wallets.

The ecosystem is finding its feet with this risk-adjusted approach. The starting pistol has been fired. It remains to be seen who will win the payments race.