Home Payments Singapore grants non-banks access to e-payments infrastructure

Singapore grants non-banks access to e-payments infrastructure

MAS: its director has hailed this week's news as a major e-payments milestone | Credit: Monetary Authority of Singapore

Singapore’s central bank is opening up the city state’s banking system’s retail payments infrastructure to non-banks as it looks to drive the adoption of e-payments among citizens and businesses.

The Monetary Authority of Singapore (MAS) announced this week that eligible non-bank financial institutions (NFIs) such as fintech companies will have direct access to its payments plumbing from February 2021 – a move its director has hailed as a major e-payments milestone.

NFIs that are licenced as ‘major payment institutions’ under Singapore’s Payment Services Act – and have therefore passed checks in areas such as risk management and anti-money laundering procedures – will be able to connect directly to Singaporean fund-transfer services known as ‘FAST’ (which stands for Fast and Secure Transfers) and PayNow.

FAST enables customers of its 23 participating entities to transfer Singapore dollars from one entity to another instantly. PayNow, which in technical terms runs ‘on top of’ FAST and has nine participant banks, allows consumers and businesses to make instant payments across accounts using a proxy such as a mobile-phone number, National Registration Identification Card (NRIC)/ Foreign Identification Number (FIN) number, or Unique Entity Number (UEN).

‘E-payments will become even simpler’

MAS announced that it was looking to enable direct access to FAST and PayNow for licenced NFIs in September 2018 (see details at the bottom of this story).

With effect from February people who use licenced NFIs’ ‘e-wallets’ will be able to make real-time fund transfers between bank accounts and e-wallets, as well as across different e-wallets. Currently, most e-wallets require the use of debit or credit cards to top-up funds, and transfers between e-wallets are not possible. Also, businesses that partner any of the 23 FAST or nine PayNow banks, or e-wallets that have been what are known as ‘closed-loop ecosystems’, will be able to receive real-time payments from other users of e-wallets or mobile-banking applications that will be joining  FAST or PayNow.

“Direct access by NFIs to FAST and PayNow closes the last-mile gap in Singapore’s e-payments journey,” said MAS managing director Ravi Menon. “Consumers who may not have ready access to debit or credit cards to fund their e-wallets will now have the option to do so directly through their bank accounts. Our vision to enable complete real-time payments interoperability will now become a reality. Adoption of e-payments will become even simpler for individuals and businesses.”

In respect of the initiative’s mechanics, NFIs will be able to connect directly through a new Application Programming Interface (API) payment gateway – an API is a software intermediary that allows two machines to interact.

The API was developed by Singapore’s Direct FAST Working Group (DFWG), with input from the Singapore Clearing House Association (SCHA) and the Association of Banks in Singapore (ABS), which govern FAST and PayNow respectively. The DFWG was set up after the September 2018 announcement.

“FAST and PayNow adoption rates have exceeded expectations and we are confident that the addition of new players will help accelerate the national path towards a less-cash economy,” said Association of Banks in Singapore director Ong Ai-Boon.

Singapore preparing for fintech festival

Singapore is currently gearing up for the Singapore Fintech Festival, more fully known as the SFF x Singapore Week of Innovation & TeCHnology or ‘SFF x SWITCH 2020’, which will run from 7-11 December.

MAS last week announced the 20 finalists for the 2020 ‘Global Fintech Hackcelerator’, which forms part of the festival.  This year’s finalists have developed innovations that seek to drive social and environmental impact within the financial sector in response to the challenges posed by COVID-19 and climate change.

The 20 finalists will each pitch at the Global FinTech Hackcelerator Demo Day on 10 December. They were selected through two parallel segments – a local programme, which addressed problem statements collated from Singapore’s financial sector, and an international programme. Three winners will each win S$50,000 (about US$36,800).

Participants from the international programme comprise 10 winners from six fintech competitions organised by Abu Dhabi Global Market; Accelpoint (Poland); the Saudi G20 Presidency and the Bank for International Settlements Innovation Hub; Central Bank of Kenya; United Nations Capital Development Fund (UNCDF); and New York City-headquartered non-profit organisation Women’s World Banking.


SINGAPORE’S E-PAYMENTS INFRASTRUCTURE EXPLAINED

Global Government Fintech publishes below the announcement of the e-payments plans in September 2018 by Ong Ye Kung, who at the time was a MAS board member and minister for education (he is now minister for transport). He used a real-life example from everyday life in Singapore to explain the plans:

“We are not done building the e-payment infrastructure. While the important components were built around the banking industry, we need to ensure that the system architecture is open and accessible. This is important, because it ensures new players, including fintech companies and other non-bank players, can enter the industry and join the e-payment fraternity.

“The system is, however, not totally open and accessible yet. Let me give an example. Sport Singapore has a very popular and useful app called “Active Wallet”, because you can use it to book ActiveSG sports facilities. So hundreds of thousands of Singaporeans are on it regularly.


“There are a few ways you can top up your Active Wallet. You can use a debit or credit card, or link your DBS or POSB bank accounts (where you even have the choice of auto top-ups). Or you can go to any ActiveSG Sport Centre to top up your Active Wallet.


“But the current way to top up from bank accounts is limited as it depends on whether each bank enables this feature. If we allow Sport Singapore to access FAST, you will be able top up your Active Wallet from any bank account through a FAST transfer.


“So if we want the e-payment system in Singapore to be truly open, accessible and competitive, we will have to open up FAST to other non-bank e-wallet payment solutions, so that they can interoperate with bank accounts.


“That way, we can top-up and refund our e-wallets from bank accounts, instantly. In the past, two persons must be using the same e-wallet in order to send money to one another. In future, they can send money across different types of e-wallets, so long as they are all connected to FAST.


“What we intend to do is not new. UK and India have allowed non-banks to access central payment infrastructure to encourage competition. Hong Kong and Malaysia are also rolling out similar Faster Payments infrastructure very soon and are broadening access to payment players.


“So we will allow non-bank players to have direct access to FAST. This is to enable their e-wallets to bring greater convenience to consumers. But e-wallets are regulated under a much simpler framework that has been calibrated to payment activity, and only the risks that payments pose. E-wallets are not regulated like banks, so they cannot operate like banks, such as taking deposits or giving loans.


“We will be forming a Direct FAST industry working group, comprising the operator of FAST, banks, non-banks, and MAS, to develop business and technical requirements for non-banks to connect directly to FAST. We are glad that [fintechs] Grab, Liquid Group, MatchMove, Razer and TransferWise have signed up for this working group. (Sport Singapore is not in it – I am just using them as an example). This is a major milestone in our infrastructure development.”