On 18 October 2022, the Monetary Authority of Singapore ("MAS") published a consultation paper to seek feedback on proposed changes to the Payment Services Act 2019 ("PS Act") 1 to:
- Revise the limits on stock cap and flow cap ("Caps") imposed on personal payment accounts containing e-money ("e-wallet") issued by a Major Payment Institution ("MPI") to a user; and
- Introduce a new exemption for a MPI with regard to its arrangements which contemplate "white-label" e-wallet account issuance from the requirement to aggregate all the e-money in the e-wallets issued to the same user for purposes of applying the Caps to the user.
The consultation is targeted at all licensees and regulated entities under the PS Act, financial institutions and other interested parties (including members of the public and payment service users). Feedback must be submitted to MAS by 25 November 2022.
This Update highlights the key proposals in the consultation paper.
Proposed Revised Caps on Personal E-Wallets
Presently, an MPI is required under the PS Act to ensure that:
- The amount of funds that can be held at any given time in an e-wallet of a user does not exceed S$5,000 ("stock cap");
- The total outflow over a rolling 12-month period in an e-wallet of a user does not exceed S$30,000 ("flow cap").
To facilitate specific user needs, the Caps are subject to the following exemptions:
- Users may load more than S$5,000 into their e-wallets on an intra-day basis, so long as the end-of-day balance is below S$5,000;
- The flow cap excludes funds transferred into the user's own or designated local bank accounts, or his/her overseas bank account.
The Caps are calculated on a "per user, per payment institution" basis (discussed more in the next section).
Proposed Revision to Caps
For better customer convenience and to support innovation in the e-payments landscape, MAS proposes to increase the Caps as follows:
Proposed Revised Limit
MAS considered the potential impact of revising the caps on the stability of the Singapore financial system. This is because these Caps are relevant to mitigate potential significant outflows from bank deposits to non-bank e-wallets. After considering scenario projections based on historical consumer usage statistics, MAS has taken the view that the financial stability objectives can still be met even with the higher proposed Caps.
As raising the Caps also means potentially increasing the funds held or transferred through e-wallets, and therefore exposure to greater potential losses from scams involving e-wallets, MAS has also advised that e-wallet issuers should be aware of this risk and consider whether they need to enhance their anti-scam controls.
Proposed New Exemption from Aggregate Caps Requirement for MPIs
Under the PS Act at present, an MPI that issues two or more e-wallets to any user is required to aggregate all the e-money in the e-wallets issued to that user and apply the Caps to the user ("Aggregate Caps Requirement").
MAS proposes to exempt an MPI that enters into the following arrangement from the Aggregate Caps Requirement where the MPI:
- Enters into an arrangement with e-money issuance service providers ("e-money issuers") where the MPI will issue e-wallets on behalf of the e-money issuers, and the e-wallets will store e-money issued by the e-money issuers to their payment service users; and
- Provides the e-wallet issuance service to two or more e-money issuers,
(referred to as the "white-label account issuance arrangement"). This means that for the purposes of applying the Caps, the MPI will not be required to aggregate the e-money in e-wallets issued to the same payment service user under the white-label account issuance arrangement.
For clarity, if an MPI issues two or more e-wallets to a payment service user on behalf of a single e-money issuer, the MPI needs to aggregate the e-money contained in those two or more e-wallets issued to that payment service user for the purposes of applying the Caps.
For further details, please refer to the consultation paper which also provides an illustration of how this works.
This consultation demonstrates that the payments services landscape is constantly evolving, and the regulatory framework has to be reviewed and updated. Although the PS Act is a relatively new legislation which came into effect in 2020, it has already seen several proposed amendments and legislative and policy consultations.
MAS takes feedback into consideration and constantly reviews legislative framework to ensure that the regulations are right-sized and addresses key risks and concerns applicable to regulated payment services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.