E-payments: Rules to be updated to protect users

Singapore

SINGAPORE will update its regulation to beef up consumer protection as it moves into becoming an electronic-payments society, said the managing director of the Monetary Authority of Singapore (MAS) Ravi Menon on Friday.

To this end, the MAS will set up a Payments Council to align payment initiatives with national strategies and the public interest.

Speaking at a financial technology (fintech) seminar, he said that the MAS's vision is to make Singapore an electronic-payments society - one that spurs continuous innovation in payments technology, gives consumers maximum convenience and confidence in making payments and enables firms to raise their productivity through an integration of payments with business processes. In short, it is to be a society where swift, simple and secure payments are a reality for everyone.

Mr Menon outlined four key strategies to create an e-payments society: streamlined regulation, inclusive governance, inter-operable infrastructure and pervasive digitisation.

He noted that the existing regulatory framework for payments cuts across the Money-Changing and Remittance Businesses Act (MCRBA) and the Payment Systems (Oversight) Act (PSOA).

"Every month, the MAS meets many fintech firms that do not fit neatly into categories like remittance or stored value.

"It is not efficient for companies to be regulated under two pieces of legislation, which were not written with the fintech solutions of today in mind," he said.

Mr Menon also noted that the nature of risk in the payments ecosystem is also changing, and that, with the proliferation of innovative e-payment solutions and the rise of e-commerce, payment firms have become more enticing targets for cyber criminals.

The MAS will streamline the MCRBA and PSOA 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.

Under the new framework, providers of payment services will need 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," he said.

The Payments Council that will be set up will bring together stakeholders to guide the development of Singapore's payments landscape in a coherent way, he said.

In its mission to align payment initiatives with national strategies and public interest, it will develop common payments infrastructure, promote open access and inter-operability in payments solutions, enhance the quality of payments systems through the adoption of best practices, as well as make electronic payments accessible to all.

Mr Menon cited a KPMG study which described Singapore's underlying infrastructure as world-class, but noted that its payments preferences are still largely paper-based. Daily payments in cash by consumers is high; among businesses, the use of cheques is relatively high.

Cash in circulation in Singapore is 8.8 per cent of the gross domestic product (GDP); it is 4.4 per cent in Australia and 2.1 per cent in Sweden.

As recently as 2014, each person was still writing 12.7 cheques a year, compared to 7.1 in Australia, and practically zero in Sweden.

The economic cost of using cash and cheques is not trivial, he said. It is estimated that the cost of cash and cheques is around 0.5 per cent of GDP - 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," he said.

The online interbank fund transfers system launched in 2014 called FAST is "grossly under-utilised", he said, adding that the one key barrier to using FAST is that the user is required to know the bank account number of the individual to whom the funds are being transferred.

The Association of Banks in Singapore (ABS) is developing a Central Addressing Scheme (CAS), under which payments can be made through FAST using only the recipient's mobile number or NRIC number, or - in the case of businesses - the Unique Entity Number (UEN).

If all goes well, bank account numbers will not be required for a majority of electronic fund transfers by this time next year, he said.

For small businesses, a barrier to using FAST has been cost; small and medium-sized enterprises (SMEs) have said some banks can charge up to S$10 for fund transfers using FAST, though free cheque payments are offered every month.

Mr Menon, noting that cheque processing is a resource-intensive operation that is far from costless, said: "Banks should not be reluctant to accurately reflect the true marginal cost of their various payment instruments."

With credit and debit cards usage at retailers, consumers often have to ask which card is accepted, and cashiers' counters are cluttered with multiple point-of-sale terminals.

To fix this, the ABS has tapped the payments industry to develop a unified point-of-sale terminal or UPOS, which can accept all major cards, including contactless ones or those stored in smartphones. UPOS terminals are already being rolled out.

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