Disruptive technologies are creating opportunities and challenges across financial services today, particularly in the payments industry.
Asia’s growth in digital payments is unmatched, with a predicted annual growth rate of 16 per cent from 2020 to 2025i. As society becomes more connected and technology changes the way people live and work, the digital transformation of this industry is set to accelerate.
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Long gone were the days where banks held a comfortable leadership position in the payment ecosystem. We now see an increased volume of entry of formidable non-traditional players into the market with the aim to deliver a seamless integration of financial services into existing products.
To survive and thrive in the new era of payments, financial institutions must adapt their business models and make critical decisions. As rapid digitalisation put existing financial infrastructures to the test, regulators are considering measures to strike the right balance between innovation and risk mitigation. Mark Chew, Partner, Audit & Assurance at Mazars in Singapore explores how the payment landscape is changing in the region.
In Singapore, there are several key trends that will dominate the payments landscape.
- E-wallet proliferation
In recent years, the meteoric rise of digital wallets in Asia is powered by the unparalleled growth of the e-commerce and ride-hailing sectors. In a region with an exceptionally high smartphone penetration rate, it comes as no surprise that consumers are using e-wallets for transactions everywhere, from hospitals to hawker stalls.
Super-app operating models such as Grab are accelerating and driving the usage of e-wallets in the region, including Singapore, at scale. Payment providers are looking to integrate value-added services ranging from personal finance to travel and even medical services, into their mobile wallet offerings.
Convenience and user confidence will increasingly drive the adoption of digital wallets as the first point of contact for cashless payments, instead of cards. This will help to empower the underbanked population, through different ways such as eliminating risks related to money transfers which drive financial inclusion.
- Increased partnership
While the competition between traditional and non-traditional financial service providers will continue to intensify, the payment ecosystem of the future will be built on cooperation.
Singapore is seeing greater collaboration between incumbent institutions and FinTech companies, and this is set to continue into the future. A bank’s strong consumer base and robust infrastructure mixed with sophisticated, new capabilities brought by new entrants will ultimately enhance the end user’s payments experience.
Organisations that use their networks to effectively leverage the data generated along the value chain to improve the customer experience will likely emerge as winners in the long run.
Collaborations are also being formed beyond borders. In September 2021, the Monetary Authority of Singapore (MAS) and Bank Negara Malaysia announced plans to commence a phased linkage of Singapore’s real-time payment system PayNow and Malaysia’s DuitNow to enable instant fund transfers. This follows MAS’ announcement to link PayNow with India’s Unified Payments Interface earlier that month.
- Data-driven offerings
Payment insights generate a wealth of information, making data the most valuable assets of financial services. Advances in analytics enable innovative players to look into customers’ spending patterns to create more competitive and personalised offerings.
Consumers are always in the search of payment services that are faster, simpler, and more secure. With data-driven offerings, providers can meet customers’ ever-changing preferences and boost conversion rates.
For corporate clients, access to real-time data provided by payment services will significantly help them to grow their revenues, address business challenges, and make better-informed decisions.
Whilst creating value and revenue from data, financial service companies need to be aware of the data protection and privacy implications that arise across different jurisdictions. Big data tools are useful in helping companies to meet compliance requirements.
The Payment Services Act: How can companies meet the compliance requirements in Singapore?
Compliance costs are very significant for entities in the financial services sector and that will continue to be the case in the future. Authorities across the globe are considering different measures to promote the growth of digital payments while safeguarding the public interest.
The Payment Services Act (“PS Act”) was passed by Parliament on 14 January 2019 and came into force on 28 January 2020 as announced by the Monetary Authority of Singapore (MAS). The PS Act is a forward-looking framework for the regulation of payment systems and payment service providers in Singapore and was designed to create a robust e-payments ecosystem in the country while ensuring consumer protection and confidence.
The PS Act resulted in a more comprehensive regulatory scope for MAS to include seven basic types of payment services:
- Account issuance service
- Domestic money transfer service
- Cross-border money transfer service
- Merchant acquisition service
- E-money issuance service
- Digital payment token (DPT) services
- Money-changing service
This effort also facilitates competition by promoting interoperability across different e-payment solutions.
Under the Payment Services (Amendment) Bill 2021 passed on 4 January 2021, amendments concerning anti-money laundering and countering terrorist financing (AML/CTF), cross-border money transfer services and DPT services were introduced.
Under the PS Act, companies wishing to provide payment services in Singapore will need to obtain a Payment Service Provider Licence from MAS.
Read the full article here: https://bit.ly/3FNZyNK
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[i] “Asia-Pacific Online Payment Methods 2021 Post COVID-19,” Research and Markets. Asia-Pacific Online Payment Methods 2021 Post COVID-19 (researchandmarkets.com), 2021.
Source: Mazars Singapore
