Singapore's cashless society goals require "nudge-based" regulation

By Alex Hamilton | 27 February 2019

The Monetary Authority of Singapore (MAS)'s new payments regulation “would have challenged even the leanest and most agile” financial firms, but “nudge-based” law-making is crucial to innovation, according to Lu Zurawski, consumer payments practice lead at ACI Worldwide.

On January 31, MAS announced it would give banks and credit card issuers more time to adopt its E-Payments User Protection Guidelines. The guidelines, first issued in September 2018, were originally scheduled to come into force at the end of January, but a number of banks, according to MAS, requested an extension to the timeline due to the “scale and complexity” of the system changes required by the guidelines. The new deadline is 30 June 2019.

“It’s not a total surprise for the Singaporean banks to have been granted more time to accommodate these eminently sensible e-payment user protection guidelines,” said Zurawski, in an email. “When they were announced, the new rules came with a somewhat aspirational three-month implementation window. But a rational assessment of the new technical systems needed by financial institutions to handle customer notifications, and the need to re-assess liability positions in such a short timeframe would have challenged even the leanest and most agile FIs.”

Over the past few years, the government has been attempting to create a cashless economy. In August 2017, prime minister Lee Hsien Loong announced during his annual National Day rally speech that the country had fallen behind to China, while six in 10 transactions made in Singapore still involved cash. In September last year, MAS launched the Singapore Quick Response Code (SGQR), adopted by 27 payment schemes in the country. SGQR purports to simplify payments by becoming an umbrella code for several payment systems, including NETS, PayNow and GrabPay.

“Although MAS has granted more time in this case, there is a still a global trend for payments regulators to use this kind of ‘nudge-based’ guidance as a way of signaling to the financial services industry the expected norms for customer service in new digital economies,” said Zurawski.

A January 2019 report from QBE Insurance found that 24% of SMEs in Singapore prefer to use cash and cheques. 71% of respondents said they were aware of PayNow Corporate, the country’s peer-to-peer payment platform, though only 26% of them used it.

“Government support for digitalisation was also raised in the findings, highlighting a disconnect between awareness and uptake,” QBE wrote in the report. “Whilst 65% of SMEs indicated that they are aware of the various forms of government support available to help businesses digitalise, only 30% have gone on to utilise the support. This is despite the realisation by many businesses that they lack the digital skills needed to move forward.”

On the consumer side, an October 2018 survey from VMWare found that 65% of banking app users in Singapore did not trust their app’s security. 81% of those surveyed said that cash was the most secure form of payment.

“All these efforts will come to naught if people do not feel safe using e-payments,” said Singapore minister for education and MAS board member, Ong Ye Kung, in a September 2018 speech. “The last piece of the e-payments jigsaw is regulations for payments that are transparent, easily understood and give sufficient peace of mind to all parties.

“Financial institutions are expected to provide timely payment transaction notifications to users. When a user sees that an unauthorised transaction has occurred, he should as quickly as possible notify his financial institution, which will investigate, assess and provide compensation where applicable, to claims in a timely manner.”

Zurawski added: “While some industry players may argue that the guidelines are not totally clear and open to varying interpretations, the direction of travel of this kind of regulation is reasonably clear. In common with similar initiatives in Europe, the UK and Australia, the spirit of these payment guidelines is to ensure that account holders have full visibility and control over their payment accounts. This shift towards customer-centric transparency of payments information is to be welcomed.”

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