How to obtain payment system license in Singapore?

Elena Mashina

One of the options for obtaining a payment system license is Singapore, that in recent years has significantly changed the regulation and lowered the barriers for fintech projects. Nevertheless, the local regulator has a large number of requirements for obtaining a license. These requirements depend on the type of activity that the fintech project plans to carry out. You can read about the main requirements imposed by Singapore's legislation for payment systems in our article.

Table of contents:

Types of payment system licenses in Singapore

Regulation distinguishes two types of companies:

Payment Systems (Payment Systems), which carry out funds transfers;
Payment Service Providers (Payment Service Provider), which carry out specific payment services.

Payment Service Providers may perform the following activities:

A - account opening, which includes opening an e-wallet and issuing non-bank credit cards
B - domestic transfers within Singapore
C - international transfers
D - merchant acquiring
E - issuance of electronic money
F - purchase and sale of tokens and cryptocurrencies
G - purchase and sale of foreign currency

Depending on the activity, the regulator issues three types of licenses:

Currency exchange license
Standard license of a payment institution. They can carry out any type of activity, but the average monthly payment transfers should not exceed 3 million dollars and the daily volume of electronic money - not more than 5 million dollars.
Major Payment Institution License. If such license is available, the system may carry out any activities without limitation of transaction volumes.

The main risks of obtaining payment system license

The creation of the payment system implies certain risks, depending on the features of the activity. These risks include the following:

The first risk is related to the compliance with the AML/CFT legislation, aimed to fight against money laundering and terrorism financing.
The necessity to create a payment system compatible with other platforms
The need to differentiate accounts with customer funds and payment system funds
Risks related to technologies. In order to operate as payment system it is necessary to provide user identification, personal data safety and prevention of cyber-attacks.

Requirements to obtain the payment system license in Singapore

To obtain a payment system license in Singapore, the following requirements must be met:

A defined corporate structure;
Compliance of directors, beneficiaries and employees with certain requirements;
Competence of directors, which implies relevant experience of the company's officers;
Presence of a permanent office in Singapore where any data will be stored. Also, the applicant must specify at least one person who will always be available for customer inquiries;
The amount of minimum authorized capital depends on the type of license:
- For a standard license - $100,000.
- For a major license, $250,000;
Financial security, which represents the minimum reserves of the company, provided to the regulator
- In cases when all operations in a month do not exceed $ 6 million for any of the services - $100,000.
- In other cases – $200,000;
Technology Risk Management. The applicant must pass a test to confirm that the payment system is capable of managing risks. Such test must be passed after the application, but before the license is issued;
Independent audit;
The major shareholders, including the parent company, must send a document confirming their obligations.

Licensing requirements related to Singapore citizenship

The law sets strict limitations on the presence of beneficiaries who are citizens of Singapore. Depending on the organizational form, the following requirements are specified:

A sole proprietorship applicant must be a Singapore citizen;
Limited Liability Company - most partners must be Singapore citizens;
Half of the shares in a company incorporated in Singapore must be owned by Singapore citizens;
If the company is incorporated outside Singapore, the parent company must be a foreign bank or operate in the currency exchange industry and meet the following criteria:
- A significant bank in another jurisdiction.
- Good reputation and passing the "fit and proper" test
- Meets local AML-/CFT-requirements.

Obligations of a payment system licensed in Singapore

The regulator pays special attention to the obligations of the payment system after obtaining a license. These include:

Annual passing of an audit.
Monthly reporting on the provider's accounts, transfer volume, electronic money volume
Additional obligation for token providers to report every six months on high-risk transactions

Features of the regulation of the major payment institution license in Singapore

Major license holders must comply with the following restrictions:

Prohibiting users from keeping more than $5,000 in an e-wallet;
Prohibition to transfer more than $30,000 within one year to the accounts, which were not identified by the payment system.

License fee for obtaining a payment system license in Singapore

To obtain a currency exchange license, the license fee is $500 and the annual fee is $1,500.

The company licensed for other activities must pay an annual license fee, which depends on the volume of revenue. On the average it shall be

For standard license - $5,000.
For major license - $10,000.

Thus, obtaining a payment system license in Singapore is a complicated process. The watchdog wants to make sure that the fintech company complies with all the requirements and has taken all measures to reduce the risks associated with money laundering and other possible consequences. In addition, it is worth paying attention to the drafting documents and checking for compliance with the requirements that at least half of the partners have Singaporean citizenship. Singapore creates a favorable environment for fintech activities, while wanting to make sure that all requirements are met. If you have any questions or need help with obtaining a payment system license, please contact the lawyers of A4 Law Firm.