As banking regulations are progressively calibrated and applied onto fintechs in the region, the Monetary Authority of Singapore (MAS) has revealed last week its plans to prevent shadow banking by fintech companies. This follows the trend of steady encroachment by large fintechs into the sphere of traditional financial services offered by banks.
A law will be passed to require larger e-wallet operators (with an average daily e-money float of over S$5million) in Singapore to ring-fence their customers’ mobile wallet funds. Such fintech players will also be prevented from using such funds to provide loans. According to MAS, the hallmark of a bank lies in taking a deposit and lending it out – a fintech firm cannot do that unless it obtains a banking licence.
These new rules will be enacted as part of the Payment Services Bill when it becomes legislation. The Bill regulates entities depending on the type of payment activities they provide to customers. It aims to streamline the regulation of payment services under a single regulatory framework, expand the range of regulated payment activities to reflect developments in the payment services sector, and adjust regulatory standards according to the risks posed by each payment activity.
The Bill, which is expected to be passed by end of the year or early next year, was the subject of a consultation paper published in November 2017 which you can read here.