MAS: E-Wallet Operators Must Ring-Fence Funds
A new piece of legislation in Singapore will soon require mobile wallet operators above a certain size to ring-fence their funds.
A new piece of legislation - likely to be passed by end of the year, will require mobile wallet operators to ring fence their funds. Under the Payment Services Bill, mobile wallet operators with an average daily e-money float of more than S$5 million would have to secure the funds fully.
«The float in the e-wallet has to be secured fully if it is above S$5 million in aggregate - the fintech cannot lend that to somebody else,» Ravi Menon said in an interview with the «Business Times» (behind paywall).
Ringfencing is practised not only by banks but also by securities dealers and insurers, who separate insurance funds from shareholders' funds.
Not Allowed To Lend
The Payment Services Bill, likely to become legislation by end of the year or early next year - focuses on regulating businesses according to the activities they provide.
«Once you take a deposit and lend it out, you become a bank. That's a clear line that a fintech cannot cross, unless it obtains a banking licence,» Menon added. The stand echoes what Ong Ye Kung, board member of MAS had said during the recent launch of the country's single QR code, as reported by finews.asia
«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,» Ong had said.
Proportionality
Banks are increasingly unhappy with the fact that fintechs are eating part of their lunch, yet face less regulations. However, huge capital requirements and other Basel III regulations are deemed as unrealistic for pure e-wallet and payment operators, noted Menon. Instead, materiality and proportionality applies when deciding how to regulate fintechs.
«We want to achieve a level playing field from the perspective of risk. If a fintech poses one per cent of the risk that a bank poses, how can we impose the same burden on them?» said Menon.
Lighter Touch
As banking regulations are progressively applied onto Fintechs operating in the region, e-wallet operator Grab Financials believe that these will be the «lighter version» as compared to those imposed on banks.
«I believe that the intention (of the MAS) is to promote innovation rather than stifle innovation,» Reuben Lai, senior managing director of Grab Financial Group told finews.asia on Tuesday in a separate interview.
Different Approach
Singapore's approach to various fintech activities differs from other jurisdictions though. In China for example, big e-wallet operators Alipay and Wechat Pay have fluorished with the ability to collect deposits, lend money, and provide wealth management services.
However larger payment fintechs in Singapore could explore a fee model from offering advisory services, said Menon. However, they would need a separate financial advisory licence from the MAS.
