Next step in Singapore’s payments journey
Jul03

Next step in Singapore’s payments journey

As Singapore moves towards a Smart Nation and a cashless society, our electronic payments system has also developed to allow consumers to send and receive money easily. The most recent development in this journey is PayNow, which allows bank customers to transfer funds using only the recipient’s mobile number or Singapore NRIC/FIN. Technology has transformed the way Singaporeans use financial services, and surveys show that 94% of Singaporeans have used mobile and internet banking to access their bank accounts. In addition, one in five consumers in South-East Asia use digital wallets, with Singapore being the top adopter in the region. Electronic payments are becoming more common, and Unified Point-of-Sale (UPOS) terminals are being used at major supermarkets across Singapore. Even traditionally cash-based hawker centres are catching up to this trend, and some are undergoing a trial to accept contactless cards or QR codes which customers can scan with their phones to make payments. MAS is also reviewing the regulatory framework for payments, and it recently proposed an activity-based regulatory regime for payments that will align requirements to the specific payment activities undertaken by businesses. It will be interesting to see how new developments such as PayNow will shape the industry feedback MAS receives on this proposal as well as the second round of public consultation. In addition, stakeholders in the payments ecosystem also have the opportunity to chart Singapore’s epayments journey, as MAS has also established a Payments Council under its leadership, which will function as a forum for the payments industry and businesses to discuss payment strategies and cross-cutting issues, and promote inter-operable payment solutions. With the recent launch of PayNow, transferring funds is not only fast and secure, but also convenient and efficient. PayNow rides on existing infrastructure used by Fast and Secure Transfers (FAST), which allows customers of 19 participating banks to make interbank fund transfers almost immediately and at no cost. Before PayNow, under FAST, transferring funds was almost immediate, but transferors need to know the recipient’s bank and account number. There is also no need for PayNow users to have a mobile wallet, which is required by existing solutions such as DBS’ PayLah!. Looking ahead, PayNow will soon also be introduced for transactions between individuals and businesses, and there is also potential for it to be implemented across South-East Asia. Making payments convenient, fast and secure is a key component in Singapore’s goal to become a Smart Nation, and PayNow is a step in the right direction. We are hopeful that the uptake of PayNow will be swift amongst Singaporeans, and that there will be continued innovations in the payments space in the near...

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Blurred Lines: MAS streamlines regulation of banks’ non-financial services activities
Jul03

Blurred Lines: MAS streamlines regulation of banks’ non-financial services activities

16 years ago, when MAS introduced the anti-commingling framework to separate financial and non-financial businesses of banks, the iPhone did not exist and clamshell Motorola Razrs were cool. Today, almost all Singaporeans carry smart phones and our wireless broadband penetration has gone up to 200%, making Singapore one of the most connected societies in the world. This connectivity has made Singapore the perfect ground for technology disruption, and we have seen how technology disruption has impacted traditional business models and shaped consumer behaviour in Singapore. For example, instead of dining and shopping along Orchard Road, many of us now get our meals delivered via Deliveroo and make purchases on ecommerce platforms like Taobao or Honest Bee. Financial services are not immune to technology disruption and the manner in which their customers consume their services. Non-financial companies such as WeChat have created platforms that enable customers to chat, purchase and pay for goods and services, including financial products, all within one mobile application. Such disruption encroaches onto activities that were historically in the financial services remit. MAS recognises that this disruption has resulted in the increasing blurring of lines between financial and non-financial businesses, and that banks are facing increasing competition from non-financial businesses that have leveraged their large user base to provide digital wallets, payments and remittance services. In 2011, MAS took a first step in giving banks greater allowance to carry out non-financial businesses that are related or complementary to their core financial businesses under certain conditions. This time, MAS has gone further by streamlining the requirements for banks seeking to conduct or invest in permissible non-financial businesses. For example, banks will not need to seek prior regulatory approval before conducting or acquiring major equity stakes in permissible non-financial businesses. Other requirements such as conducting regular stress test or external audits have also been removed. As such, banks can more easily integrate banking services into customers’ day-to-day activities and deliver value added service to them by ensuring these additional services can be provided on the banks’ platform. MAS has highlighted that it is still important for banks to focus on their core financial businesses and has consequently limited such non-financial businesses to 10% of a bank’s capital funds. Apart from certain digital platforms which banks are now expressly allowed to operate, banks would also need to seek case-by-case approval from MAS. Going forward, non-financial businesses will continue to make inroads into traditional banking business, and banks need to be able to transform and adapt to such changes in the economy and society. We welcome MAS’ swift response to these changes around us, and look forward to the consultation...

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Regulating Robo-advisors in Singapore
Jun15

Regulating Robo-advisors in Singapore

Introduction On 7 June 2017, the Monetary Authority of Singapore (MAS) issued a consultation paper on the provision of digital advisory services in Singapore. The consultation paper proposes amendments to the Securities and Futures Act and the Financial Advisors Act which are the existing framework governing the provision of financial advice, to allow for the wider use of digital advisors or robo-advisors whilst ensuring that there are adequate safeguards in place. In the consultation, the MAS expressly welcomes the offering of digital advisory services to complement the existing advisory channels as it is of the view that doing so would improve consumers’ access to low-cost investment advice, in effect resulting in a greater democratisation of financial advice. This move by the MAS is evidence of its commitment to strengthening Singapore’s position as a Smart Financial Centre and is a boost to Singapore’s standing as a FinTech hub. What are the key proposals? The following are the key proposals that the MAS has made to regulate digital advisers: Governance and supervision of algorithms. As digital advisers are primarily algorithm-driven, a fault or bias in the algorithms would affect all customers of such digital advisers. Therefore, the methodology of the algorithm needs to be robust to collect and analyse all necessary information. Controls also need to be in place to monitor and test the algorithms to ensure that they perform properly. Proper disclosures to ensure an informed decision on the digital adviser’s services are also necessary. Finally, the digital advisory service’s board and senior management would have the responsibility of ensuring compliance and maintaining effective oversight. Suitability of advice. The MAS is prepared to grant case-by-case exemptions to fully-automated digital advice services from the need to collect full information on the financial circumstances of a customer when advising on traditional exchange traded funds. This is because certain digital advisers already seek to eliminate unsuitable customers through the use of “knock-out” questions. Portfolio management. For portfolio rebalancing by digital advisers, which occurs at regular intervals, the MAS proposes to dispense with the requirement to obtain the customer’s prior approval for every transaction. Instead, a one-time prior acknowledgment in writing would be sufficient, provided that the customers are notified for every rebalancing transaction and are given the opportunity to object. In addition, the MAS is also prepared to admit digital advisers that do not meet the current requisite five-year corporate track record of managing funds for retail investors, provided certain safeguards are followed. Execution of investment transactions. Currently, digital advisers assist customers in the execution of recommended portfolios by passing the trade orders to brokerage firms for execution. However, such activities are currently...

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