Friday,21 June 2024

Singapore introduces initiatives to boost banks' role in payments and expansion into non-financial businesses

5 min read

By The Asian Banker Live

At the 44th Annual Dinner of The Association of Banks in Singapore (ABS), Minister for Finance, Heng Swee Keat, and outgoing chairman of ABS and CEO of UOB, Wee Ee Cheong, announced three key initiatives that will ensure that banks continue to dominate digital payments and expand into e-commerce and online based non-financial businesses in the island state.

Here is the transcript:

Wee Ee Cheong: To enhance commuters’ convenience, ABS has been working with the Land Transport Authority to enable the use of contactless credit and debit cards for public transport fare payments, the first country in Asia to do so.

Yet another milestone is reached tonight, with the launch of the much-anticipated real-time funds transfer service, using just the customers’ mobile number, NRIC or FIN number.

More milestones will come soon, with banks working intensely with MAS and government agencies to provide seamless and smart solutions across various activities, including account opening, KYC, payments, wealth management, trade finance and so on.

While pursuing various initiatives in the race to be a smart financial centre, let’s not lose sight of our ultimate objective. It is not about pursuing technology or efficiency for its own sake, but to achieve sustainable business growth and quality of life for customers.

Advances in technology and innovation have led to greater speed, ease and convenience. This opens up borderless opportunities for everyone, including criminals. Innovation and disruption take on different meanings when applied with ill intent. Indeed, technology has allowed crimes to be committed quickly, easily and on a large scale, impacting individuals, industries and countries. Recent incidents, from ransomware to terrorist attacks, are stark reminders.

Strengthening our security systems to counter such threats remains a top priority. The industry is taking a proactive, collaborative and multi-pronged approach. Because whether it’s fighting terrorism, financial or cybercrimes, teamwork and coordination are key. We are only as strong as our weakest link.

As chairman of the permanent committee on finance, investment and trade, ABS has organised various workshops and sharing sessions with regional peers. Topics such as trade internationalisation and digital economy will come into greater focus as Singapore assumes the chairmanship of ASEAN next year. There is much we can learn from one another.

We see it as our duty to collaborate, to share and to help one another, in our interconnected world. We each have to play our part, to embrace our collective responsibility, in order to realise our fullest potential in the larger community. These tie in with the mission of ABS, to bring together industry players for the greater good.

That spirit of teamwork and inclusiveness is all the more crucial as the industry transforms itself for the next stage of growth, where the pace of change will only accelerate. The mindset and actions of everyone in this room are what will determine our future.  

Heng Swee Keat: MAS introduced the anti-commingling framework in 2001 to separate the financial and non-financial businesses of banks. It was a pre-emptive move to ensure that banks remained focused on their core financial businesses and competencies. This policy has served the industry well. But the policy has not remained static.

In 2011, MAS took a first step to give banks greater allowance to carry on non-financial businesses that are related or complementary to the bank's core financial businesses. Since then, the outlook has changed further.

The growing ease of accessing financial services over the internet and smartphones presents new channels for banks to deliver value added services to customers. The line between financial and non-financial business is blurring. Banks are facing increasing competition from online and non-financial players that have leveraged their large user base to provide digital wallets, payments and remittance services.

MAS recognises that we can simplify our requirements to enable banks to embed banking services into consumers’ day-to-day activities.

First, MAS will streamline regulatory requirements for banks seeking to conduct or invest in permissible non-financial businesses that are related or complementary to their core financial businesses.

Currently, banks seeking to conduct or invest in non-financial businesses must comply with specific conditions and obtain approval from their parent supervisory authority. Going forward, banks will not need to seek prior regulatory approval before conducting or acquiring major equity stakes in permissible non-financial businesses.

MAS will also remove detailed requirements such as conducting regular stress tests or external audits. However, MAS will continue to require banks and their boards to put in place the necessary risk management governance arrangements. It remains important for banks to focus on their core financial businesses. Hence, MAS will limit such non-financial businesses to 10% of a bank’s capital funds.

Second, MAS will allow banks to operate digital platforms that match buyers and sellers of consumer goods or services, as well as to conduct the online sale of such goods or services. These activities must be related or complementary to banks’ core financial businesses and will be subject to the cap I mentioned earlier.

Banks are currently prohibited from selling consumer goods. But non-bank digital players are now offering a seamless transactional experience in the sale as well as payment of consumer goods.

Under MAS’ proposal, banks may be involved in the sale of consumer goods and services on these platforms in a way that provides synergy to the provision of banking services. Beyond digital platforms, banks would need to seek case-by-case approval, as we do not want banks to engage in the sale of consumer goods and services as a business in its own right.

We want ABS to remain as an association of banks, and not an association of disasters. MAS will provide the operational details of these policy changes in a consultation paper that will be released by the end of September.

As Singapore progresses to become a Smart Nation, the country needs a robust electronic payments system that allows individuals and businesses to send and receive money easily. 

Let me recap the progress we have made to-date in our e-payments journey and provide an update on latest developments.

Unified Point-of-Sale, or UPOS, terminals are being deployed at major supermarkets and convenience stores across the country. They make payments easier for customers, and help frontline service staff be more productive and efficient.

Going beyond the established merchants, MAS and NEA are working to trial various electronic payment solutions in a few hawker centres, with a view to achieving mass adoption in subsequent years.

For instance, hawkers can accept contactless cards or QR codes which consumers can scan with their phones to make payments.

MAS is also reviewing the regulatory regime for payments. Last year, MAS proposed an activity-based regulatory framework for payments that will right-size requirements to the specific payments activities that new players are undertaking.

MAS is carefully reviewing the industry feedback provided in the first round of consultation, and aims to respond by November.

MAS will also be conducting a second round of public consultation.

We will also establish a forum for the payments industry and businesses to come together to discuss payment strategies and cross-cutting issues as well as promote inter-operable payment solutions.

MAS has invited 18 senior leaders representing banks, payment companies, industry associations, and businesses to form a Payments Council under MAS’ leadership.

This is a unique opportunity for stakeholders in the payments ecosystem to collaboratively chart the future of Singapore’s e-payments journey.

But the most significant development in our e-payments journey begins tonight with the official launch by ABS of PayNow.

I congratulate ABS and Banking Computer Services (BCS) for the many months of hard work, and also the seven participating banks for making PayNow a reality.

PayNow will make use of Singapore’s real-time 24x7 Fast and Secure Transfers (FAST) payment system to allow PayNow users to, securely and seamlessly, transfer funds to each other using only their recipient’s mobile or NRIC numbers.

The government is also looking into the use of PayNow to make payments directly to citizens’ bank accounts using their NRIC numbers.

Categories: eCommerce, Mobile Banking, Payments, Regulation, Retail Banking, Technology & Operations
Keywords: Digital Payments
Institutions: MAS
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