Monetary Authority of Singapore to promote fully integrated e-payments ecosystem

The Monetary Authority of Singapore (MAS) has articulated strategies to promote electronic payments in Singapore, and has published a Singapore Payments Roadmap which it has commissioned KPMG Advisory to produce.

MD of MAS, Ravi Menon noted in a keynote speech at the Sim Kee Boon Institute Conference on FinTech and Financial Inclusion that Singapore still prefers to use cash and cheques for payment. "For consumers, the use of cash for daily payments is high. For businesses, the use of cheques is relatively high," he said. "Cash in circulation in Singapore is 8.8% of GDP, compared to 4.4% in Australia and 2.12% in Sweden. Twelve point seven cheques per person were written in Singapore in 2014, compared to 7.1 in Australia. In Sweden, the total number of cheques issued is so small that it is effectively zero on a per person basis!

"The economic cost of this heavy reliance on cash and cheques is not trivial. Our studies, conducted together with KPMG, estimate that the social costs of cash and cheques is around 0.5% of GDP, or about S$2 billion per year. A good part of these costs can be attributed to the cost of securing cash, both in transit and in storage, and processing cheques."

For the Singapore Payments Roadmap more than 2,500 stakeholders in Singapore’s payment ecosystem and across the world were surveyed to understand the current state of payments, focusing on how consumers and businesses make payments. KPMG observed that Singapore had the requisite components to be a best-in-class jurisdiction in the area of payments but would need to take several steps to improve the landscape: 

a. Streamline and strengthen the regulatory framework

b. Establish a new governance model for payments

c. Enhance the adoption of electronic payments

The report recommends that the current regulatory regime governing payments and remittances be streamlined to create a single and modular regime that will be applied on an activity basis, rather than specific payment systems. The new payments regime will provide MAS the flexibility to address emerging risk areas like cyber security and consumer protection. The new framework will help promote innovation and encourage non-traditional fintech players to access the Singapore market and provide a wider spectrum of payment solutions.

Menon shared that the updated regulatory framework would streamline the Money-Changing and Remittance Businesses Act of 1979 and the Payment Systems (Oversight) Act of 2006 to create a single piece of legislation governing both traditional and innovative payment companies.

"We will enhance the provisions for consumer protection and strengthen cyber security requirements. We will make regulation modular and activity-based, so that firms need to meet only those regulations pertinent to the specific payment activities they undertake, rather than the full gamut of payments regulations," he said.

"What will this new framework mean? Providers of payment services will require only one licence to conduct multiple payment activities. Users of payment services - consumers or businesses – can take more comfort that their financial information is safe from the threat of cyber-attacks and theft."

The report recommends strengthening the governance model and creating a national payments council that fosters innovation, competition and collaboration in the payments industry, including leveraging fintech. Specifically, this new payments council will coordinate key initiatives, such as promoting interoperability and adopting common standards. The payments council will comprise representatives from among users and providers of payment solutions. With the payments council, consumers and businesses can expect greater coordination and alignment among payment initiatives at the national level.

Menon explained that the broad-based Payments Council will include senior representation from both providers and users of payments systems. "The Council will help to align payment initiatives with national strategies and public interest. Specifically, this means to develop common payments infrastructure; promote open access and inter-operability in payments solutions; enhance the quality of payments systems through the adoption of relevant standards and best practices; and make electronic payments accessible to all," he said.

The report welcomes several key infrastructure projects being undertaken by the industry as having the potential to transform the payment landscape for recurring, retail and peer-to-peer payments, with the implementation of interoperable solutions. These include enabling more convenient payments through a centralised addressing system and creating a seamless consumer experience with unified point-of-sale payment terminals.

One such initiative, Menon shared, is with the Association of Banks in Singapore (ABS). The Central Addressing Scheme (CAS) will allow payments to be made through the Fast and Secure Transfers (FAST) initiative, which enables instant bank-to-bank transfers domestically, using only a recipient’s mobile number, or NRIC number, or unique entity number.

"If all goes well, by this time next year, we will no longer need to remember bank account numbers for a majority of our electronic fund transfers," he said.
Menon also remarked on the wide array of point-of-sale terminals at cashiers’ counters, each of which might only accept one type of card. "This is confusing for customers and unproductive for counter staff," he said.

"The ABS has tapped on the payments industry to develop a unified point-of-sale terminal or UPOS, which can accept all major card brands, including those that are contactless or embedded in smartphones. UPOS terminals are already being rolled out. About 1,000 of them have been deployed at convenience stores such as 7-Eleven and other retailers. Another 10,000 are expected to follow over the next two years. Large supermarket chains, such as Cold Storage, FairPrice, and Sheng Shiong are also piloting and gradually deploying these UPOS terminals."

Menon also talked about a pilot for an Account-Based Ticketing System by the Land Transport Authority (LTA). By the end of this year, LTA will be studying how commuters can use existing contactless credit and debit cards to pay for train and bus rides. This moves the responsibility of deductions and billing onto an existing payment structure, freeing commuters from needing to queue and top-up their existing stored value transit cards. "Users will even be able to use their mobile wallets to pay for public transport," Menon added.

MAS will be conducting a public consultation on the review of the payments regulatory framework and proposed payments council in the coming week. 

Interested?

Read the Singapore Payments Roadmap (PDF)