Online Banking Licences for Internet Companies that Provide Mobile Payment Solutions

Ms Sun Xueling asked the Prime Minister (a) whether there are plans to offer online banking licences to Internet companies focused on providing solutions for mobile payments; and (b) what will be the pre-requisites in terms of infrastructure and company capabilities for such licences.

MAS' existing bank licensing framework can accommodate Internet-only banks to operate in Singapore. As the risks posed by Internet-only banks are not fundamentally different from those posed by conventional banks, they will operate within the same licensing and regulatory regime as conventional banks.

But most Internet companies will not require a banking licence unless they intend to take deposits and grant loans. If they are offering mainly payment solutions, depending on the specific type of payment service they provide, they may be subject to a narrow set of regulatory requirements pertinent to that payment service.

For example, PayPal, an online payment platform that facilitates e-commerce transactions, is only required to comply with requirements applicable to stored value facilities under the Payment Systems (Oversight) Act. Likewise, Singtel's mRemit, a remittance service on mobile phones, is licensed under the Money-Changing and Remittance Businesses Act.

More non-bank FinTech payment companies are coming onto the scene, offering a variety of payment services. MAS encourages this development as it potentially offers consumers more choice and convenience and further develops our financial industry. To better calibrate its regulatory requirements to the various modes of innovative payment services, MAS has put out for consultation a new, streamlined activity-based regulatory framework for payments. The aim is to promote innovation, ensure security and foster consumer confidence. MAS is currently reviewing public feedback on the proposed payments regulatory framework.

Currently, financial institutions have their own proprietary systems for mobile payments. Will the MAS look at encouraging inter-operability between these systems to create greater convenience for consumers?

We have actually a very valuable infrastructure in place called FAST − that is the Fast And Secure Transfers system that all banks ride on. That is why from my bank account, I can make a payment to another person's bank account, so long as we both have bank accounts in Singapore.

What is not so convenient is that it is based on bank accounts.

So, by the end of this year, the industry will be incorporating within FAST a Central Addressing Scheme (CAS). What CAS allows FAST to do is to have a proxy for our bank accounts, using, say, our NRIC number or mobile phone number. For that matter, businesses can also use their business name and all these can be codified into a QR code. Which means once this is in place, there is potential for us to make payments, not different from WeChat or Alipay.

What is better than WeChat and Alipay is that the FAST system is across the financial and banking system. Today, I believe, WeChat can only pay to WeChat and Alipay to Alipay. But this system allows us to pay across banks. And I think there is great potential for us to promote e-payment once that is in place.